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Spectrum Brands Holdings, Inc. (SPB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered modest top-line growth with stronger GAAP profitability: net sales $700.2M (+1.2% YoY), gross margin 36.8% (+140 bps YoY), operating income $44.7M (+78.8% YoY), diluted EPS $0.87 (+70.6% YoY); adjusted EPS rose to $1.02 despite adjusted EBITDA down 7.7% due to prior-year investment income and higher brand spend .
  • Segment mix: H&G had one of its best first quarters on extended fall and pre-season load-ins; HPC grew on strong e-commerce (>30% of sales), while GPC declined on a ~$10M order pull-forward into Q4 and ongoing aquatics softness .
  • FY2025 earnings framework reiterated: low single-digit net sales growth, mid-to-high single-digit adjusted EBITDA growth, ~50% conversion of adjusted EBITDA to adjusted free cash flow; D&A $115–$125M, SBC $20–$25M, capex $50–$60M, cash taxes $40–$45M (tariffs estimated ~$12M headwind to be largely mitigated) .
  • Capital allocation remains a catalyst: 0.8M shares repurchased for $72.9M in Q1; $183M repurchased YTD through the call; quarterly dividend declared at $0.47 per share (payable Mar 11, 2025) .

What Went Well and What Went Wrong

  • What Went Well

    • “H&G had one of its best first quarters in recent history” driven by extended fall season and timing of retailer inventory builds; adjusted EBITDA turned positive to $9.3M vs loss last year .
    • HPC e-commerce outperformed, now >30% of HPC’s global sales; holiday season “solid,” with products like Emerald French Door air fryer and Remington Balder gaining traction .
    • GAAP profitability improved: gross margin +140 bps YoY, operating income +$19.7M YoY; CEO: “Gross margins are also up 140 basis points... Our operations are continuing to deliver cost improvements and we are staying lean” .

  • What Went Wrong

    • GPC sales decreased 6.1% (organic -6.4%) from pull-forward of ~$10M into Q4 and aquatics category softness; adjusted EBITDA dipped slightly (-$1.2M) .
    • Adjusted EBITDA down 7.7% and margin -110 bps due to loss of prior-year investment income and higher brand investments (≈+$8M Q1), partly offset by gross profit gains .
    • Tariffs/ocean freight inflation: higher tariffs post-exemption expiration pressured HPC margins; management highlighted recently announced U.S. tariffs as a dynamic headwind, though plans are in motion to mitigate .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($M)$779.4 $773.7 $700.2
Gross Profit ($M)$302.8 $288.0 $257.8
Gross Margin (%)38.9% n/a36.8%
Operating Income ($M)$47.7 $21.9 $44.7
Net Income from Continuing Ops ($M)$19.1 $12.8 $24.6
Diluted EPS from Continuing Ops ($)$0.66 $0.45 $0.87
Adjusted EBITDA ($M)$106.3 $68.9 $77.8
Adjusted EBITDA Margin (%)13.6% 8.9% 11.1%
Adjusted EPS ($)$1.10 $0.97 $1.02

Q1 YoY detail (vs Q1 FY2024):

MetricQ1 2025Q1 2024
Net Sales ($M)$700.2 $692.2
Gross Profit ($M)$257.8 $244.9
Gross Margin (%)36.8% 35.4%
Operating Income ($M)$44.7 $25.0
Net Income from Continuing Ops ($M)$24.6 $17.5
Diluted EPS from Continuing Ops ($)$0.87 $0.51
Adjusted EBITDA ($M)$77.8 $84.3
Adjusted EPS ($)$1.02 $0.63

Segment breakdown

SegmentQ3 2024 Net Sales ($M)Q3 2024 Adj. EBITDA ($M)Q4 2024 Net Sales ($M)Q4 2024 Adj. EBITDA ($M)Q1 2025 Net Sales ($M)Q1 2025 Adj. EBITDA ($M)
GPC$282.2 $56.7 $302.5 $44.3 $260.0 $51.5
H&G$211.0 $43.3 $134.9 $19.0 $92.1 $9.3
HPC$286.2 $11.8 $336.3 $19.0 $348.1 $26.7

Liquidity and leverage KPIs

KPIQ3 2024Q4 2024Q1 2025
Cash ($M)$157.7 + $149.1 ST investments $369.0 $180.0
Total Liquidity ($M)$797.0 $860.0 $670.7
Undrawn Revolver ($M)n/an/a$490.8
Total Debt ($M)$578.0 $578.0 $575.1
Net Debt ($M)~$272.0 ~$209.0 ~$395.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Net Sales GrowthFY2025Low single-digit growth Low single-digit growth Maintained
Adjusted EBITDA GrowthFY2025Mid to high single-digits Mid to high single-digits Maintained
Adjusted Free Cash FlowFY2025~50% of adjusted EBITDA ~50% of adjusted EBITDA Maintained
Long-term Net Leverage TargetLong-term2.0–2.5x 2.0–2.5x Maintained
Depreciation & AmortizationFY2025n/a$115–$125M Initiated detail
Stock-based CompensationFY2025n/a$20–$25M Initiated detail
CapexFY2025n/a$50–$60M Initiated detail
Cash TaxesFY2025n/a$40–$45M Initiated detail
Tariffs impact (est.)FY2025n/a≈$12M headwind; plan to mitigate New headwind, mitigation planned
DividendQuarterly$0.42 (Q4 FY2024) $0.47 declared, payable Mar 11, 2025 Raised in Nov; reaffirmed

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
E-commerce momentumCompany e-commerce >21% of sales; double-digit growth across all units HPC global growth in Home Appliance & Personal Care aided by promotions HPC e-commerce >30% of sales; outpaced brick-and-mortar Strengthening channel mix toward online
Tariffs/macroFocus on cost improvements; freight inflation noted Ocean freight inflation remained a headwind New U.S. tariffs; ~$12M impact planned to be mitigated; accelerating China exit for HPC Elevated macro risk; mitigation actions accelerating
ERP (S/4HANA)Process underway; preparation noted GPC Q4 benefitted from pull-forward ahead of Oct 3 go-live GPC NA live Oct 3; H&G live end-Jan; some pull-forward into Q1 Rollouts completed; timing effects normalizing
Supply chain/inventoryImproved retailer inventory health in H&G Extended season; normalized inventory levels “Healthy” inventory; strong service levels Stabilizing
HPC separationMulti-track sale/merger/spin; Form 10 filed Ongoing process Dual-track slowed by tariff uncertainty; still committed to maximizing value Timing extended; thesis intact
GPC aquaticsFlat globally; NA down; EMEA up Softness continued Soft demand; initiatives (entry-level kits, tank manufacturing) Persistent softness; targeted actions
Pet consumer mixn/an/aNA trade-down pressure; value-focused innovation planned Mixed; value positioning emphasis
H&G seasonal setWeather-driven strength Extended season; category support “Fall Crawl” campaign; strong first quarter Positive setup

Management Commentary

  • CEO: “Our Home and Personal Care business had a solid holiday season, and our Home and Garden business had one of its best first quarters in recent history... Gross margins are also up 140 basis points... Our operations are continuing to deliver cost improvements and we are staying lean” .
  • CEO on tariffs: “Our operations and commercial teams are activating plans to minimize and mitigate the impact of the recent tariff actions... accelerating our plans to pivot our production out of China... we intend to continue this momentum as the year progresses” .
  • CFO: “Adjusted EBITDA was $77.8 million... driven by investment income of $23 million in the prior year and increased brand-focused investments, partially offset by higher volume and improved gross margins. Excluding prior year investment income, adjusted EBITDA was up $16.5 million” .
  • CEO on capital allocation: “We have repurchased approx. 2.1 million shares for about $183 million... we believe our share price is significantly undervalued” .

Q&A Highlights

  • H&G retailer commitment and seasonality: Retailers appear similarly committed vs last year, with incremental off-shelf space; Q1 pull-forward likely offsets in Q2; prudently optimistic depending on weather .
  • HPC separation and tariffs: Tariff uncertainty has slowed the dual-track process; focus remains on improving fundamentals and value creation; potential to benefit from innovation cycle multiples .
  • GPC e-commerce and aquatics: POS double-digit growth in online; shipment distortion from one e-commerce customer’s fulfillment constraints; entry-level aquatics initiatives and Europe’s steadier pond market support consumables .
  • Buybacks and valuation: Will continue leaning into buybacks given low leverage and perceived undervaluation; fundamentals expected to drive eventual re-rating .
  • Tariff mitigation: ~$12M FY25 impact; mitigation via supplier cost, pricing, and additional cost improvements; upgrading supply chain flexibility; plan to move 35–40% of U.S.-bound appliance sourcing out of China by year-end .

Estimates Context

  • S&P Global consensus EPS/revenue/EBITDA for Q1 2025 and near-term periods were unavailable due to an API rate limit; therefore, we cannot assess beat/miss vs Wall Street consensus at this time. We will update when S&P Global data access is restored.

Key Takeaways for Investors

  • Mix and margin backdrop improved: Q1 gross margin +140 bps YoY and operating income +79% YoY; adjusted EPS +$0.39 despite brand investments—evidence of operational discipline and cost actions .
  • H&G set-up constructive: strong early season and retailer load-ins; campaign and innovation support (Spectracide One Shot, new traps) should help sustain momentum, subject to weather .
  • HPC is a swing factor: e-commerce momentum and sourcing diversification should offset tariff pressures; separation timing extended but value thesis intact .
  • GPC stabilization likely: timing headwinds from Q4 pull-forward and aquatics softness remain, but EMEA strength and brand investments (Good Boy, Good & Fun, cat adjacencies) underpin medium-term growth .
  • Capital discipline continues: aggressive buybacks and dividend support return profile; liquidity ample with $670.7M total and revolver capacity .
  • Watch tariff mitigation execution and FX: Management guided to mitigating most FY25 tariff impact and expects FX headwinds; progress on sourcing diversification and pricing will be key .
  • Near-term trading lens: Positive narrative in H&G and HPC e-commerce vs caution in GPC aquatics/trade-down suggests balanced risk; catalysts include tariff mitigation updates, HPC strategic process developments, and seasonal H&G sell-through .