Executive Summary

Q3 FY2025 net sales fell 10.2% to $699.6M as stop shipments during tariff-related price negotiations, supply constraints from pausing China purchases, and soft demand in Pet and Home & Personal Care weighed on results; gross margin contracted 110 bps to 37.8% and adjusted EBITDA declined to $76.6M .
GAAP diluted EPS from continuing operations rose to $0.83 on lower interest/taxes and share count, while adjusted EPS increased to $1.24; management highlighted July sequential sales improvement across businesses and tariff pricing now in place with major customers .
Guidance framework for FY25 remains suspended; Spectrum reaffirmed expectation to generate approximately $160M of FY25 free cash flow and continues targeting long-term net leverage of 2.0–2.5x .
CEO emphasized Q3 actions (“tariff torpedo”), pausing China purchases at 145–170% tariff, stopping shipments to certain retailers until pricing was finalized, cost reductions >$50M, and initial pricing/supplier concessions essentially eliminating tariff exposure by quarter-end; targeting an incremental $20–$25M in pricing and supplier concessions heading into FY26 .

What Went Well and What Went Wrong

What Went Well
- Tariff mitigation: “With our initial rounds of pricing and supplier concessions, we had essentially eliminated our tariff exposure at the end of Q3,” with $20–$25M targeted to fully cover incremental exposure into FY26 .
- Early Q4 recovery: July delivered sequentially higher sales rates in all businesses; improved weather led to strong POS and retailer replenishment in Home & Garden .
- Shareholder returns and balance sheet resilience: repurchased 0.9M shares for $54.4M in Q3; 17.1M shares since HHI close for $1.3B; 24.2M shares outstanding; liquidity $510.5M and net debt ~$559.1M .
What Went Wrong
- Top-line pressure: Net sales -10.2% (organic -11.1%) due to stop shipments, tariff-related supply constraints, category softness in GPC and HPC, and unfavorable weather delaying H&G replenishment .
- Margin compression: Gross margin -110 bps; adjusted EBITDA margin -270 bps YoY to 10.9% driven by lower volumes, inflation, tariffs, and unfavorable mix .
- Segment headwinds: GPC (-9.6% net sales; adj. EBITDA margin -290 bps) and HPC (-10.8% net sales; adj. EBITDA margin -140 bps) pressured by tariff pricing negotiations, supply constraints, and softer US/EMEA demand .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$700.2	$675.7	$699.6
Gross Margin %	36.8%	37.5%	37.8%
Operating Income ($USD Millions)	$44.7	$19.5	$31.3
Net Income - Continuing Ops ($USD Millions)	$24.6	$1.8	$20.5
Diluted EPS - Continuing Ops ($USD)	$0.87	$0.06	$0.83
Adjusted EPS ($USD)	$1.02	$0.68	$1.24
Adjusted EBITDA ($USD Millions)	$77.8	$71.3	$76.6
Adjusted EBITDA Margin %	11.1%	10.6%	10.9%

Segment net sales

Segment Net Sales ($USD Millions)	Q1 2025	Q2 2025	Q3 2025
Global Pet Care (GPC)	$260.0	$269.2	$255.2
Home & Garden (H&G)	$92.1	$152.3	$189.2
Home & Personal Care (HPC)	$348.1	$254.2	$255.2

Segment adjusted EBITDA

Segment Adjusted EBITDA ($USD Millions)	Q1 2025	Q2 2025	Q3 2025
Global Pet Care (GPC)	$51.5	$50.0	$44.0
Home & Garden (H&G)	$9.3	$26.7	$38.6
Home & Personal Care (HPC)	$26.7	$7.3	$7.0

Key KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
Cash And Equivalents ($USD Millions)	$179.9	$96.0	$122.0
Total Liquidity ($USD Millions)	$670.7	$504.6	$510.5
Total Debt ($USD Millions)	$575.1	$656.9	$681.1
Net Debt ($USD Millions)	~$395.2	~$560.9	~$559.1

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Earnings Framework (FY25)	FY 2025	Low single-digit net sales growth; mid–high single-digit adjusted EBITDA growth; ~50% adjusted EBITDA-to-adjusted FCF	Framework suspended; expect ~$160M FY25 FCF	Lowered/Suspended
Free Cash Flow	FY 2025	~50% of adjusted EBITDA	~$160M ; reaffirmed	Clarified target
Long-term Net Leverage	Long-term	2.0–2.5x	2.0–2.5x (unchanged)	Maintained
Capital Expenditures	FY 2025	$50–$60M	No update provided post framework suspension	N/A
D&A; Stock-based comp	FY 2025	D&A $115–$125M; SBC $20–$25M	No update provided	N/A
Cash Taxes	FY 2025	$40–$45M	No update provided	N/A
Dividend	Quarterly	Declared Q3: $0.47/share payable Sept 23, 2025	Declared (current action)	Declared
Pricing/Supplier Concessions	FY 2026	N/A	Target incremental $20–$25M to fully cover exposure	New target

Earnings Call Themes & Trends

Topic	Q1 2025 (Past 2Q)	Q2 2025 (Prior Q)	Q3 2025 (Current)	Trend
Tariffs & supply chain	Announced +10% China tariffs; plan to mitigate via supplier concessions, pricing; accelerate HPC non-China sourcing to 35–40% by FY25 end	Tariffs spiked to 145–170%; paused China purchases; suspended FY25 framework; pivot to cash	Resumed selective imports at 30% tariff; pricing finalized; initial concessions eliminated tariff exposure by Q3-end; target $20–$25M FY26	Improving mitigation; normalization
Stop shipments & pricing	N/A	Preparing for pricing actions	Stopped shipments to certain retailers until pricing finalized; now largely resolved	Resolved/normalizing
Consumer demand	Stable to cautious (HPC holiday strong; H&G extended fall)	Softer US demand in GPC/HPC; cautious Europe	Still cautious; July sequential improvement across segments	Stabilizing
Weather (H&G)	Extended fall aided Q1	Later seasonal ramp	Wet/cool early summer hurt Q3; improved late June/July with strong POS	Improving into Q4
ERP/S4HANA	GPC NA and H&G go-lives; some pull-forward effects	Post-go-live impacts in H&G timing	N/A in Q3 commentary	Largely behind
M&A & capital allocation	Maintain buybacks; explore Pet/H&G acquisitions; HPC separation delayed by tariffs	Continued buybacks; more likely M&A as asset prices reset	Buybacks continue; chased deal, outbid; disciplined, focus on Pet scale	Active, disciplined
Sourcing diversification	HPC 35% non-China by FY25; Pet/H&G minimal China	Pet/H&G virtually out of China by CY25; HPC 45% non-China by CY25	Dual-sourcing; supply turned back on; pricing in place	Progressing

Management Commentary

CEO: “When the tariff rate on Chinese imports to the US went to 145% early in the third quarter, we paused virtually all purchases from China… We strategically began importing again when the rate dropped to 30%… We now have our initial rounds of pricing in place… We have also looked internally and reduced costs by over $50 million in fiscal 2025.” .
CEO: “Our July results are early indications that the tough decisions we made in Q3 were the right ones… With our initial rounds of pricing and supplier concessions, we had essentially eliminated our tariff exposure at the end of Q3. Based on current known trade arrangements, we are targeting an incremental combined $20 to $25 million…” .
CFO: Adjusted EBITDA fell due to prior-year investment income ($12.7M), lower volumes and margins; adjusted diluted EPS rose to $1.24 on lower taxes/interest and fewer shares .

Q&A Highlights

Lost sales due to stop shipments/supply constraints estimated at ~$30M in Q3; about half already recovered in July; minimal impact on H&G; recovery concentrated in GPC/HPC .
Guidance visibility: Framework remains suspended given volatility; management highlighted normalization into Q4 and setup for FY26 .
Pricing magnitude: FY26 incremental combined pricing/supplier concessions of $20–$25M across ~$3B revenue base (<1%) .
Capital allocation: Shares viewed as undervalued; continued buybacks with optionality for disciplined Pet/H&G M&A; outbid on one opportunity; focus on health & wellness, cat, niche food adjacencies in Pet .
Logistics: Shipping/container rates steady under contracted arrangements; no Q4 disruption envisaged barring trade blow-ups .

Estimates Context

Q3 FY2025: Adjusted EPS $1.24 vs Primary EPS Consensus Mean $1.243* (in line); Revenue $699.6M vs Revenue Consensus Mean $738.3M* (miss) .
Q2 FY2025: Adjusted EPS $0.68 vs Primary EPS Consensus Mean $1.380* (miss); Revenue $675.7M vs Revenue Consensus Mean $693.0M* (miss) .
Q4 FY2025 forward: Primary EPS Consensus Mean $0.912*; Revenue Consensus Mean $738.6M* (management signaled improved sales vs Q3 organic decline; actuals later showed reported figures post quarter) .

Values retrieved from S&P Global.*

Metric	Q2 2025	Q3 2025
Primary EPS Consensus Mean ($)	1.380*	1.243*
Primary EPS Actual/Adjusted ($)	0.68	1.24
Revenue Consensus Mean ($USD Millions)	693.0*	738.3*
Revenue Actual ($USD Millions)	675.7	699.6
Primary EPS - # of Estimates	9*	8*
Revenue - # of Estimates	7*	7*

Implications: Q3 revenue shortfall reflects stop shipments and tariff supply constraints; EPS held up due to lower interest/taxes and reduced share count. Estimate revisions likely center on near-term revenue normalization and pricing/supplier concessions offset, with management reiterating ~$160M FY25 FCF and improved Q4 sales vs Q3 organic decline .

Key Takeaways for Investors

Tariff mitigation is largely in place; pricing and supplier concessions eliminated tariff exposure by Q3-end with $20–$25M incremental targeted for FY26—supports margin stabilization as supply diversifies .
Sequential momentum: July sales inflected positively across segments; weather normalization aided H&G; expect Q4 sales improvement vs Q3 organic decline .
Cash generation focus intact: FY25 framework suspended, but ~$160M FCF reaffirmed; liquidity $510.5M and net leverage below long-term target enable continued buybacks/M&A optionality .
Segment watch: H&G gaining share with innovation (Spectracide Wasp/Hornet/Yellowjacket Trap; Hot Shot Flying Insect Trap); GPC shelf gains and innovation in chews/health; HPC still challenged in US but international/online strength offsets .
Non-GAAP adjustments meaningful for EPS (impairments, ERP, exit/disposal costs); adjusted EPS better reflects underlying performance in volatile macro .
Capital allocation: Ongoing repurchases (0.9M shares in Q3; 17.1M since HHI); disciplined pursuit of Pet adjacencies (health & wellness, cat, niche food) to lift growth/multiple over time .
Near-term trading: Q3 revenue miss vs consensus but EPS in line; positive July trends and tariff coverage are potential catalysts as investors digest normalization into Q4 .

Spectrum Brands Holdings, Inc. (SPB)·Q3 2025 Earnings Summary