We returned to growth, all the while maintaining a strong balance sheet position. We continue to exercise discipline by optimizing working capital and keeping our net leverage low while also returning capital to our shareholders. On the strategic front, as we disclosed in our recent 8-K filing Monday of this week, we've entered into an agreement with Oaktree Capital Management to form a strategic partnership in our HPC business. I'm excited to be partnering with a firm with a proven track record of taking businesses similar to HPC and optimizing them for standalone success.
Their investment implies a valuation for the HPC business of approximately 6x LTM EBITDA as of Q1 fiscal 2026. It establishes a separate dedicated platform for HPC to maximize focus and growth potential. This is an excellent demonstration of efficiency, and I'm extremely proud of the team for their continued diligence in driving working capital efficiency while constantly and consistently meeting customer demand. Later in the call, Faisal will share more details on our innovation pipeline and how it's fueling our growth across the portfolio.
We are encouraged by the strong results in both our Global Pet Care and our Home & Garden businesses, with our key brands in both businesses delivering above-market sales growth. Beyond organic growth, we continue to remain optimistic about M&A opportunities in both segments. We are committed to a disciplined process in evaluating acquisition targets and believe we are well-positioned to be the consolidator of choice in both pet and the Home & Garden categories. Organic net sales increased 1.5%, primarily driven by strong performance within our Global Pet Care and Home & Garden businesses.
| Metric | Period | Current guidance |
|---|---|---|
| Adjusted EBITDA growth | Full-year fiscal 2026 | Low to mid-single-digit growth (raised) |
| Net sales | Full-year fiscal 2026 | Reaffirmed |
| Adjusted free cash flow | Full-year fiscal 2026 | Reaffirmed |
| Metric | YoY | Note |
|---|---|---|
| Reported net sales | +4.9% | Driven by strong Global Pet Care and Home & Garden performance plus $22.9 million of favorable FX; organic net sales up 1.5%. |
| Adjusted EBITDA | +17.8% (to $84 million, up $12.7 million) | Driven by improved gross margins. |
| Gross margin | +60 bps (to 38.1%) | Largely driven by pricing, cost improvement actions, and favorable FX, partially offset by higher trade spend and higher tariff costs. |
| Operating income | +$24 million (to $43.5 million) | Gross profit increase and lower operating expense, the latter helped by a prior-year trade name impairment and lower investment spend. |
| Adjusted diluted EPS | Increased to $1.25 | Higher adjusted EBITDA and a reduction in shares outstanding. |
| Global Pet Care reported net sales | +11.2% (organic +7.6%) | Strength in companion animal and aquatics, with EMEA companion animal led by Good Boy and aquatics by Tetra; included roughly $6 million pulled forward ahead of GPC EMEA S/4HANA go-live. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Macroeconomic and geopolitical environment | Tariff disruption and macro volatility viewed as largely behind the company | Signs of stabilization with a resilient consumer, but caution around Middle East conflict, higher fuel prices, and potential summer U.S. trade policy volatility | — |
| HPC strategic separation | Stated objective to separate HPC from other business units | Oaktree partnership establishes a well-capitalized standalone vehicle, creating optionality for sale, M&A or spin-off | — |
| Capital returns | Over $1.37 billion returned since HHI close; ~44% of share count repurchased | Over $1.4 billion returned and almost 45% of share count repurchased; ~100,000 shares bought for ~$6.8 million in Q2, more than $300 million remaining authorization, but will be judicious going forward | — |
| Inflation and tariffs | Tariff exposure largely mitigated through concessions, cost cuts and pricing | Modest inflationary pressure on commodities and freight from escalated geopolitical tension, not viewed as a significant FY headwind and expected to be largely offset by recent trade policy changes | — |