Spectrum Brands Holdings, Inc. Q4 2025 earnings call

Welcome to Spectrum Brands Holdings' Q4 2025 earnings conference call and webcast. I'm Jen Schultz, Division Vice President of FP&A and Investor Relations, and I will moderate today's call. To help you follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations section of our website at www.spectrumbrands.com. This document will remain there following our call. Starting with slide two of the presentation, our call will be led by David Maura, our Chairman and Chief Executive Officer, and Faisal Qadir, 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, which are based upon management's current expectations, projections, 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 November 13th, 2025, 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. Our statements reflect our expectations regarding tariffs, which are based on currently known and effective tariffs and do not reflect tariffs that have been announced or delayed or other additional tariffs which could result in additional costs. 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 8-K filing, which are both available on our website in the Investor Relations section. Now, I'll turn the call over to David Maura. David?

Good morning. Thank you, Jen. Good morning, everyone. I want to welcome everybody to today's fourth quarter earnings update. I appreciate everybody taking the time to join us today. For today's call, I want to begin with a few big-picture opening remarks. First, I'm delighted and thankful to our teams for navigating a most difficult year. I am excited to let you all know that we believe that the worst of the tariff and economic disruptions to our businesses are now behind us. 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.

Fourth, our balance sheet is strong with $124 million in cash at the end of the year, zero drawn on our revolver, and we ended the year with just 1.58 turns of net leverage after returning approximately $375 million to shareholders throughout the year through buybacks and dividends in fiscal 2025. Last, but certainly not least, we are hell-bent on improving the profitability and competitive positioning of our HBC appliance business, and as the headwinds dissipate, we are excited to work towards a strategic solution for this business once again. We are also highly confident that we are well-positioned within our industry to be the consolidator of choice within the pet and home and garden industries. As we wrap up a very challenging year, navigating through headwinds largely outside of our control, I again want to start this call by simply saying thanks.

Thanks to every one of our global team members for battling through tough times. Thank you to our vendors and retailers for your partnership in addressing the macroeconomic conditions that we collectively continue to face. Lastly, thank you to our investor base for your continued trust. I know this year has been tough, but I am proud of how we have proactively and decisively reacted to these outside forces, and I believe that actually it is creating a competitive advantage for us as we look forward to the future. If I could have everyone now turn your attention to slide six. During the year, we saw a significant decline in the macroeconomic environment, which impacted overall consumer sentiment, not just here in the U.S., but globally.

Trade policy uncertainty and volatility led to softening demand in the U.S. starting in the second quarter and impacted global markets more noticeably in the second half of fiscal 2025. When tariffs were at their highest point earlier this calendar year, we were looking at an annualized tariff exposure of approximately $450 million. This exposure is now approximately $70 million-$80 million on an annualized basis. The good news is, thanks to the diligence and the incredible efforts of our global supply chain team, we are extremely happy to report to you that we have offset substantially all of this exposure through a combination of vendor concessions, painful internal cost reductions, supply-based reconfiguration and diversification, and lastly, pricing actions.

I shared this with you last quarter that we had implemented a number of cost reduction initiatives that would result in over $50 million of savings in fiscal 2025. This included a reduction in force that spanned all three of our business lines and our corporate functions. While it's never easy to take these kinds of actions, we know that the impact has been tough on our employees. We also know, however, that it was necessary to right-size our cost structure and to protect the health of the businesses. We have also made significant progress in diversifying our supply chain to increase both its resiliency and its flexibility. Heading into fiscal 2025, we had approximately $300 million of source product coming into the U.S. from China. We have since reduced these Chinese source products to the U.S. markets by nearly 50%.

Further diversification will remain a priority for us going forward, and we expect to only have approximately $15 million to maybe $20 million of direct spend in China for our two most highly valued businesses, Global Pet Care and Home & Garden, by the end of fiscal 2026. We will also continue to move product out of China within our Home & Personal Care businesses when it is the right financial decision to do so and when it does not sacrifice the standards that we have for our quality. I would also like to take the opportunity now to thank our agile global supply chain team who have worked tirelessly to navigate this volatile environment and to make sure that our supply chain going forward is much more resilient and flexible to whatever challenges may arise.

Earlier in the year, I emphasized that with all of this uncertainty, we would control what we could control. 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. In fact, we over-delivered this number. We delivered $170+ million in free cash flow through disciplined CapEx management and better working capital improvements. We ended the year with net leverage of 1.58 times, well below the stated goal of 2-2.5, all while continuing to reward our shareholders with approximately $375 million of capital returns split between share repurchases and dividends in fiscal 2025.

During just the recently completed fourth quarter, we repurchased an additional 700,000 shares of stock, and we continue buying during our pre-earnings quiet period through a 10B5-1 plan put in place in June, later, which was amended by our board in September to increase the cap on that to $100 million. In fiscal 2025, we repurchased approximately 4.4 million shares for roughly $326 million. Since the close of the fiscal year, we have purchased approximately 0.4 million shares for roughly $21.5 million in total. Since the close of the HHI transaction, we have returned over $1.37 billion of capital to our shareholders through our various share repurchase programs and reduced our share count by approximately 44% since the close of that deal. If I can now have everyone turn to slide seven, I'll give you a quick overview of fiscal 2025 results.

Thank you, David. Turning to slide 11, and a review of our Q4 results from continuing operations, beginning with our net sales. Net sales decreased 5.2%, excluding the impact of $10.5 million of favorable foreign exchange. Organic net sales decreased 6.6%, primarily driven by supply constraints as a result of our decision to pause purchases from China for the U.S. market during the third quarter and continued category softness in our Global Pet Care and Home & Personal Care business. These headwinds were partially offset by a delayed start to the season for our Home & Garden business that benefited current quarter results. Gross profit decreased $31.4 million, and gross margins of 35% decreased 220 basis points, largely driven by lower volume, unfavorable mix, inflation, and higher tariffs, partially offset by pricing, cost improvement actions, and favorable FX.

Operating expenses of just over $227 million decreased 14.6% due to lower spend in advertising and marketing and general expense management in light of category softness, as well as lower restructuring-related project spend. Operating income of $29.4 million increased by $7.5 million due to the lower operating expenses, partially offset by a decline in gross profit. GAAP net income and diluted earnings per share both increased, primarily driven by a one-time tax benefit for the quarter resulting from a tax entity realignment initiative, lower share count, and higher operating income. Adjusted EBITDA was $63.4 million, a decrease of $5.5 million driven by lower volume and reduced gross margins, partially offset by lower operating expenses. Adjusted diluted EPS increased to $2.61, driven by a one-time tax benefit that I referenced earlier, and the reduction in shares outstanding, partially offset by lower adjusted EBITDA.

Turning to slide 12, Q4 interest expense from continuing operations of $7.9 million increased $1.2 million due to higher average borrowing on our cash flow revolver in the current quarter. Cash taxes during the quarter decreased $10.2 million from the prior year. Depreciation and amortization of $23.9 million decreased $1.7 million from last year. Separately, share-based compensation increased to $5.8 million from $4.6 million in the prior year. Capital expenditures were $13.2 million in Q4, essentially flat to last year. Cash payment towards strategic transactions, restructuring-related projects, and other unusual non-recurring adjustments were $7.3 million versus $10 million last year. Moving to the balance sheet, we had a quarter-end cash balance of $123.6 million and $492.3 million available on our $500 million cash flow revolver. Total debt outstanding was approximately $581.4 million, consisting of $496 million of senior unsecured notes and $85.3 million of finance leases.

We ended the quarter with $457.8 million of net debt. Turning to slide 13 and an overview of our full year results, net sales decreased 5.2% and organic net sales decreased 5.3%. The sales performance was driven by category softness in light of macroeconomic conditions and supply shortages from the six- to eight-week pause previously mentioned. These had significantly impacted results both in our Global Pet Care and Home & Personal Care businesses. Despite strong performance by our key brands, sales in Home & Garden business were modestly down, driven by unfavorable weather conditions. Full year gross profit decreased by $77.4 million and gross margin of 36.7% decreased 70 basis points, driven by lower volume, higher inflation, increased tariff costs, and unfavorable mix. This was partially offset by cost improvement initiatives, pricing, and favorable FX.

Adjusted EBITDA decreased to $289.1 million, excluding investment income of $52.7 million in the prior year. Adjusted EBITDA decreased $30 million or 9.4%, primarily driven by lower volume and a decline in gross profit, partially offset by a reduction in operating expenses. Adjusted free cash flow was $170.7 million or approximately $7 per share, exceeding the $160 million free cash flow framework previously provided. During the year, we prioritized the health of our balance sheet through active management of CapEx investments and improved working capital. Now let's get into a review of each business unit where I'll provide you more details on the underlying performance drivers of our operational results. I'll start with our Global Pet Care business, which is slide 14. Reported net sales decreased 1.5%, and excluding favorable foreign currency impact, organic net sales decreased 3.3%.

Sales in aquatics increased high single digits, offset by mid-single digits decline in companion animals. In North America, our companion animal brands continue to trend favorably. Our brands maintained or gained market share driven by innovation and successful commercial activations with our retail partners in spite of category softness. In aquatics, we successfully mitigated category declines and delivered improved results, driven by distribution gains in pet specialty and mass channel. Comparisons for the quarter in both companion animal and aquatics were impacted by a strategic pull forward of orders by retailers in the prior year in preparation for our S/4HANA ERP implementation, resulting in an approximately $10 million headwind for the quarter. Also, as expected, our decisions to pause shipments for a six- to eight-week period when tariffs were at their highest point during the third quarter led to continued supply shortages during the current quarter.

Our inventory levels are now generally healthy, and shortages are not expected to be a significant headwind heading into fiscal 2026. Conversely, results were favorable, impacted by our decisions in the third quarter to stop shipment to a key retailer as tariff pricing negotiations stalled. By the end of the third quarter, negotiations were complete, but it did result in shipment delays benefiting our fourth quarter results. In EMEA, companion animal sales increased, driven by the continued strength of our Good Boy brand, market share gains in the U.K., and expanding further in continental Europe. Net sales also increased in our dog and cat food, led by our Eukanuba brand. Aquatic sales also increased with the Tetra brand gaining shares in key markets, mitigating category softness. Our innovation continues to resonate with the consumer and is largely focused on further expansion into adjacent categories.

You may recall we recently launched Greenies Collagen, a product that focuses on health and wellness benefits for pets. We also continue to launch new innovations in the treats categories as our Good Boy and Tasty product launches continue to perform well, with further plans of expansion and more unique innovations coming in the coming months. Our investments in Nature's Miracle also continue to yield results as the brand is gaining share and new points of distribution. In the fourth quarter, Nature's Miracle grew across PurePlay Online, Mass, Food, Dollar, and Drug channels. Our Good Boy brand is the number one brand in dog chews in the U.K. and is the fourth largest brand in overall pet and continues to grow market share, driven by consistent innovation. The brand's expansion across Continental Europe continues to perform really well, most recently becoming one of the top five treat brands in the Netherlands.

Okay, thanks, Faisal. Let's look at slide 19. Thanks, everybody, for joining us today on the call. Again, I'll take a few minutes just to recap the key takeaways and findings on slide 20. Fourth quarter financial results concluded a very challenging year for us. We took decisive actions, as I've mentioned. They were necessary to protect the company and the balance sheet, but it did have short-term impacts on the P&L, and that's reflected in the numbers we reported today. We will continue to be good stewards of the businesses going forward. We will be disciplined in our actions while utilizing a strong balance sheet. As you know, earlier in the year, with all the macroeconomic uncertainty, we made the strategic pivot and started running this business to maximize free cash flow. I'm proud that this decision paid off.

We were able to deliver over $170 million, or roughly $7 per share in free cash flow, to our investors. These actions are now embedded, quite frankly, in our DNA, and we're going to continue to focus on this going forward. We're really excited to report, quite frankly, that both the Global Pet Care and Home & Garden businesses, which are our two most highly valued businesses, they're going to return. We're expecting them to return to growth in fiscal 2026. We're excited about that. We believe in the categories, and we believe in our teams in these businesses. Our new product development pipeline is strong, and we're going to continue to focus on launching fewer, bigger, better initiatives for successful commercialization as we move this company forward. I also continue to be optimistic about the evolving M&A landscape.

We expect additional assets to become available at better price points. With that said, we will remain disciplined in our process as we look for highly synergistic assets while being mindful of maintaining our lower leverage. We are confident that despite the current headwinds, that are largely outside of our control, we are a stronger, more focused company as we move the business forward in its strategic transformation. We will continue to be good stewards of this appliance business, focused on overall profitability improvement as we navigate a challenging environment, and we remain committed to finding a strategic solution for this asset. As trade policy stabilizes and consumer sentiment improves, we believe synergistic growth opportunities are on the horizon with a higher probability of consolidations in this space, which we believe, frankly, is long overdue.

We are committed to executing on our operational goals, delivering improved business performance, and driving value to our stakeholders. Again, I think the good news today with today's call, we believe that the worst of the tariff and economic disruptions to our business are behind us. We expect our two highest valued businesses, Global Pet Care and Global Home & Garden, to return to growth in fiscal 2026. We're going to continue generating a lot of free cash flow as we go forward. The balance sheet is strong, and we're going to continue returning lots of capital to shareholders through buybacks and dividends as we move this business forward. I'll turn the call back over to Jen, and we'll be very happy to take your questions.

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

Hi everyone.

Hello. Morning.

Can we just get an updated thought process around the various options for the HPC business, both strategic but also fundamental as you continue to run the business? I realize you've had comments in the press release and the prepared remarks around still looking for strategic alternatives, but can we just dig a bit deeper into the potential outcomes that you're seeing, whether changing and tariff backdrop evolves those potential outcomes, and just any sort of update on how you see the path here?

The short answer is no, because I'm not going to discuss M&A opportunities on a live public call. A more broad response to your question would be it's pretty obvious when you're dealing with $450 million of tariff headwinds that it will sideline a process with strategic parties for completing a synergistic merger, if you will. We had a very robust process about a year ago at this time that got derailed by trade policy out of the United States. We pivoted to run the business to maximize cash.

We're taking the fixed expense base of that business down to basically deal with the realities of the current economic situation. We've materially diversified the supply chain there, made it more resilient and less reliant on China. We're going to improve the profitability of appliances in fiscal 2026 as we move the company forward. We're telling you that as the trade situation becomes less volatile moving forward and macroeconomic headwinds subside, we are excited to resume strategic discussions around finding a strategic solution for the business, which we believe there are many. Frankly, this industry is littered with small competitors that are subscale and barely profitable, and most of them overlevered, and some of them will go bankrupt. We intend to capitalize on that because we're the strongest player in the space.

Helpful. Thank you. Just on follow-up on the pet category, you've worked through a period of intense competitive activity, including from some large private label competitors. Where are we in the journey of the pet business? I think you've sounded a bit more confident about shelf placement and some stabilization and go forward potential and return to growth. Can you just maybe help us understand the journey and how you see the next 12 months? Thanks.

Yeah. Really happy. Thank you for that question. I'll turn it over to Faisal when I'm done for any additional remarks. Look, we are thrilled because we've infused that business with some new talent. It's got some new direction. It's got a higher level of energy to it. The team is embracing a more data-driven consumer insight. I would tell you geographic category-specific analysis of that business. In terms of your comment on private label, yeah, we saw some competition there. Post-COVID, the entire pet industry has kind of been in a recession. We were able to kind of reset some mods and some shelf space with some major players just a few months ago. We are seeing much better trends now with that done in terms of takeaway, POS, and frankly, shipments have been improving pretty consistently. That is why you hear a much more bullish outlook for the business looking into 2026. More importantly, there were branded ankle biters that entered into this space. Anybody that had access to social media and a Chinese product could kind of come in here and nibble at you.

We are seeing people go by the wayside, and we are seeing products like Nature's Miracle really take a lot of market share because the product actually works, does what it says, and a lot of competitive products simply do not. Look, I think it's still early innings. We are making incremental progress, but we are launching a lot of new product. We are getting a better response from the retail customer, and consumers seem to be buying our product at a greater rate. Quite frankly, I think this is going to be a fantastic M&A platform. My vision of getting us to $3 billion of revenue and $500 million EBITDA in pet is unchanged from the prior call. In fact, I am seeing more and more assets come to market at better prices. We have missed on a few of them because we simply refused to overpay. We will find highly synergistic businesses that complement this platform from both a cost synergy and revenue synergy standpoint. I am really looking forward to that opportunity to capitalize on it. Appreciate the question. Faisal, did I miss anything?

No, I think you have covered it. The only thing I will add is just if you look at our performance through the year, you kind of see the signs of stabilization and how our Q4 certainly seemed to be heading in the right direction for the global pet care business. We do feel that is the one business that returns to growth faster just based on where the category stands. To David's point, how our products have recently done in each of the categories that we play in. We also have expansion opportunities like we referenced in our prepared remarks about expanding into adjacent categories there. So a lot of opportunity for the Global Pet Care business.

Okay. Thanks, guys.

Thank you.

Thank you.

Hey, Bob. How are you doing, man?

Doing well. Thank you. Yeah, no. Good. As I said, nice job. It's good to chat again. I wanted to start, I know this is kind of a category and product basis question, so maybe we can dig in a little. And the question is, how much is pricing going up at retail for your categories, products, etc., kind of in aggregate? And when do you expect to get clarity on consumer acceptance of that, and how has that been playing out so far?

Yeah, great question. Look, I'm kind of stunned at how little pricing we actually had to take. I thought February, March, when I was hardly sleeping, staring at $450 million challenges, that we'd have to take a lot more pricing than we actually did. That resulted in us having to take a lot of internal pain and make some very difficult decisions to remain competitive at shelf. We had to take down fixed cost salary headcount, and that's not fun to do. We've done it, and it's in the past. We'll continue to address the fixed cost structure of the company going forward, particularly corporate overhead. We're going to be aggressive on that as we move through 2026 and complete the S/4HANA implementation in Europe. Again, in my opening remarks, I thanked our supply base.

We've worked really hard with our suppliers to remain competitive, particularly given the consumer landscape and our retailers. It is really those three levers, right? Working really hard with your vendor base, frankly, taking out internal costs and being more efficient with what you have, and then taking a little bit of price at retail. The greatest price increases came on the durable side in appliances. We were the first to move there, believe it or not. I do not think anybody in that space actually knows their numbers. I think you are still figuring out elasticity of demand, particularly in the North America market. I think we took our pain early, and frankly, I think we are going to capitalize on that note going forward. We have our work cut out. I appreciate your comments saying that we executed pretty well. I'm not pleased with the performance yet, but I'm sure looking forward to getting into 2026 and seeing how we do. I appreciate the question. I'll turn it to Faisal if I missed anything.

No, I think you covered everything. I think I'll just reiterate the point that we took our medicine early for our HPC business, and that's where we saw a lot of the impact of price elasticity, which should play in our favor going forward as we see the rest of the market kind of come up because I think everyone will have to eventually take price there.

Okay, great. Just for my follow-up, what do you see as the keys for you? Maybe you addressed it earlier, I guess, with new products a little bit, but maybe dig into the keys to returning to above category growth over the coming years because I know that has been how you have operated in the past and generally as a goal. Maybe what is it going to take to get back there above category growth in your categories?

No, it is a great question. Look, we still have to do a better job on the commercial side, and that is what we are trying to do here. Frankly, that is what we are in the early innings of, I think, in pet. Hopefully, that story can evolve to the narrative that I think it can be, which is, look, we have phenomenal products. We need to do a better job, and it is in process right now. It is what I am most excited about, about letting the consumer know that. The most effective way we can do that is by making claims that resonate with the consumer and get better packaging and communicate that on shelf. On shelf is always going to be our best market. We have to continue to drive digital. We have to continue to drive social media.

That is omnichannel. We are seeing early success there. It is still early innings. Bob, that is away from operational excellence, supply chain management, working capital management, fill rates, all the rest of that, which we have taken three years getting right. We have still not gotten to the level that I want to be at from a commercial standpoint. It is innovation, it is advertising and marketing, and it is really getting efficient returns on that spend. Over the last couple of years, we have allocated a lot more resources to R&D, marketing, advertising. This year, the teams are challenged to figure out, look at all those line items, guys, and get more on the spend you're making and figure out where the dead weight is and get rid of it because you got to do more with less in this market. We are going to be more efficient with it. We are going to get more out of it, but it is an exciting opportunity for us. We are not there yet.

Got it. Super. All right. Thanks.

Hi, great. Thank you very much. Just wanted to ask you on the tariff side and how you're thinking about it if we move back to a no tariff or kind of a pre-liberation day tariff scenario. Is there to get back the price? Can you keep anything? How do we think about that? Because I know you've taken a ton of different actions. And so I'll color on how it would play out if things do get overturned. Thanks.

Hey, Ian, I can only deal with the facts in front of me. Do not mean to be aggressive with the answer, but it's been a super volatile year. I've dealt with 16 different tariff rates all at weeks apart. We've been really aggressive in responding to all that. I have no belief that tariffs will go back to zero at all. And if they do, I'll deal with it then. That's how I see it.

Okay. And then just maybe as a follow-up, it looks like Aquatics held in relatively well. And this has really been kind of a category that's just been somewhat tough for you guys, especially on the hard good side. Are you noticing any changes in the consumer, or maybe has anything driven that? Is that just coming off of a very low base? Maybe any kind of color you could give there. Thanks.

We're the world's largest player in Tetra. We have the best brand. It's recognized without having to advertise it, right? You don't need any awareness. We've got a great product. Frankly, I'm excited about the new leadership in pet because I think we have a price pack architecture issue, and I think we have a lot of opportunity there. We're doing better in Europe than we have in North America. Kids like to live on these iPhones all day long. They don't like taking care of fish tanks. The hobbyist community has been the install base. We need to do a better job communicating that kids actually love aquariums. Taking care of fish teaches responsibility, and it's actually a very therapeutic thing to do with the family, and it's an enjoyable thing to have in your household. Ori's got a big task in front of him. He's addressing it. We are the leaders, and we are responsible for changing the narrative in that space and driving growth no matter what the external environment is. We're doing a decent job in Europe. We got to get a better job going here in North America. I hope to achieve that during fiscal 2026.

All right. Thank you very much.

Thank you, sir.

Great. Thank you, David. Faisal, good morning.

Good morning.

Couple of cleanups. Last quarter, I think you exited with about $20 million-$25 million annualized in tariff headwinds that related to the EU and Southeast Asian markets that you had not mitigated at the time. Just maybe an update on any steps you have taken to address those costs and whether you feel like you have addressed them going into 2026. Maybe start there.

I mean, I think we have eliminated most of them. I think there are two different numbers that we are giving you, right? We are giving you the gross exposure was $450 million. That was at $145 million out of China plus all the other countries, right? And then we are giving you an updated one because China rates lower. And so apples to apples, that is like $70-$80 million, but we are telling you we have mitigated the vast majority of it. And then we are also telling you that, look, things move around so much.

I used to have $120 million of exposure out of China just on pet. I think I just told you on this call that my gross exposure on global purchases for my two most high-value businesses, which is Global Pet Care and my Home & Garden business, are somewhere between $15 million-$20 million by the end of 2026. I mean, we've really worked this thing down to nothing. I will continue to flex it around, whether it's Cambodia, Vietnam, U.S., wherever we can do it. That is where it economically makes sense for us today. Faisal, if I messed the messaging up, please clean up what I said.

No, you're exactly right. For the most part, we've taken most of the actions, including pricing actions everywhere. There's a little bit more to do getting into next year, but we'll do that with a combination of, again, cost reductions, supply-based changes, supplier concessions, as well as pricing. The vast majority of it is fine.

Perfect. Thank you. Two other, if I could. Just one is just your, absolutely, what you got, your category growth expectations in 2026 relative to your own call for low single-digit top-line growth, just how you think end market demand compares to your top-line expectations. Then separately, as you think about rolling out S/4HANA, I think you mentioned moving that into Home & Personal Care, David. Just any implications there on your ability to pursue strategic solutions there while that's in flight? Just does that delay or cause any impediment to moving strategically as that project is underway? Are you able to implement it in such a way that it is sort of modular enough to potentially carve out if a separation is the ultimate solution? Thanks.

No, that is a great question. Appreciate you answering. I will take the second one. Faisal will touch on the first one. Look, the whole goal of S/4HANA is to get those single sources of truth and quit using 10 different systems all over the place and run the company more efficiently and then liquidate, frankly, corporate costs, right? AI, the whole movement is to be more efficient, period, end of story. We are basically done with that in North America. We still have to get the synergies for it. Europe is rolling that out. Home & Personal Care is on a bunch of different platforms. It has been a series of acquisitions over 20 years.

Putting that on a single source of S/4HANA is actually going to create a lot of efficiencies and create a platform there that enhances the business. It will in no way slow down anything that we have on the table now or in the future for a strategic solution. We will pursue that. If we find something great, we're going to execute it, and you'll hear about it then. In the interim, it actually will make that business more valuable to any potential partner in the future because it will have a more flexible, dynamic operating infrastructure that can actually be more plug-and-play, which is, quite frankly, where the industry needs to go. There are way too many subscale players selling product from the same supply chain to way too few retailers. That space makes no sense in its current configuration. I think S/4HANA will be not only a great enhancement to the operating income and efficiency of the company that is in existence today, but will actually enhance it as an M&A partner for future combinations. That is my opinion. Faisal.

I'll just maybe address the category question. I think Home & Garden category remains strong, but it is weather-dependent. Like we said, we expect a more normalized weather year next year, and that automatically gives you growth over this year. On the Global Pet Care categories, Aquatics, I think we are seeing signs of bottoming out, and it is kind of flattening and turning around. Same with our companion animal area. I think we are starting to see the category stabilize. Our growth is also dependent on just expansion in our own portfolio, including in adjacent categories, but as well as just gaining market share.

We're actually seeing our products perform and our brands perform better in the marketplace. Home and personal care is the one category that remains under pressure. It will be for both Europe and North America going into next year. We have to see what the market does from a pricing perspective. I think our competitors will come in the market with the price, and in the next few months, we should see all that play out. That should, in the second half of the year, play out to our advantage. In the short run, that category remains very challenging for us.

Okay. Perfect. Thanks for all that. Appreciate it.

Thank you.

Thank you. With that, we have reached the top of the hour, so we will conclude our conference call. Thank you to David and Faisal. On behalf of Spectrum Brands, thank you for your participation this morning.

Thank you. Have a good day.