Spectrum Brands Holdings, Inc. (SPB) Earnings Call Transcript & Summary

All right. Good morning. I am happy to welcome our next presenter, Spectrum Brands, back to the conference. Before we begin, let's just please take a moment to thank Spectrum Brands for sponsoring the lunch that will immediately follow today's presentation. Over the past year, Spectrum has been busy at work simplifying and refocusing its portfolio, deleveraging the balance sheet, returning more cash to shareholders and building a platform for future growth. With us today to tell the full story are Executive Chairman and CEO, David Maura; and Executive Vice President and COO, Randy Lewis; along with CFO, Jeremy Smeltser, who will be joining David and Randy for Q&A. With that, I'll turn it over to David. Take it away. Thanks for being here.

Okay. Is this on? Thank you, guys. Thanks, everybody, for coming. I'm actually really thrilled to be here this year, reflecting back on the last time we stood at this podium. And it wasn't too long ago, but we actually -- since being here last time, we successfully closed the sale of our battery business. We sold our auto care business. We reduced our debt by $2.4 billion. We brought our leverage down from 5.2x to it stands -- it stood at 3.1x. We launched the Global Productivity Improvement Program, which we've recently updated in The Street. We expect to get $100 million of run rate savings. With that, our plan is to use that to reinvest in our base business, R&D, new product development and marketing. We strengthened the leadership team significantly. To my left, I appointed Randy Lewis as our new Chief Operating Officer. We just onboarded Jeremy Smeltser as the new CFO, Spectrum Brands. And Kevin Kim is now running IR. Ehsan Zargar is not with us, but he's our new General Counsel. So you've basically got an entirely new C-suite. I'm used to being the youngest guy in the room, but now I'm the old hat, it seems. I also want to mention, we did make some commitments this time a year ago to you, and we actually delivered on those commitments. And I believe that's exceedingly important. We did $567 million of EBITDA last year, at the midpoint of our guidance. We did return to growth, although small, 1.4%. And during the course of the last 12 months, we've returned over $350 million to our shareholders with repurchases and dividends. Since the start of this new fiscal year 2020, we have executed $125 million accelerated share repurchase program, and we've repurchased over $81 million of stock through open market purchases. I'm here to convince you that we are an excelling -- actually an excellent investment opportunity. And if you're a long-term investor and you believe in true free cash flow growth, you should partner with us for the next phase of Spectrum's evolution. Forward-looking statements, I'm not going to read those. You can read those at your leisure. I guess everybody in the room wants to know about China, so let's just get that out of the way. We have a little bit of delay in our supply chains. A couple of weeks ago, it was a week. Now it's about 2 weeks. The bulk of our suppliers restarted on Feb 10. We do not anticipate any material disruption due to the coronavirus. And it may have a little bit of impact on our revenue in March, and we'll have to see how the ocean freight goes, April and May. But as I stand here today, I don't have anything to tell you other than small delays on the supply chain side. So let's just clear that up before we get going. Who are we? We're a collection of 4 business units now. Last year, we had $3.8 billion of revenue. As I mentioned, adjusted EBITDA was $567 million. Hardware & Home Improvement is our biggest asset. I did that acquisition in 2012. It represents #1 market share positions in locks and hardware. Baldwin is #1 in the luxury channel. If you guys own a home and you need new locks, please order some Baldwins. They're -- it's beautiful. It's got amazing aesthetics, and it's a phenomenal, phenomenal product. Kwikset is the #1 mid-price point lock in America today. We have the largest installed base. We have something called Smartkey technology, which we're going to try to advertise more as we go forward. It allows you to change your lock in 30 seconds or less. We won #1 at the CES show this year in Vegas for a product called Halo. Randy is going to talk more in his segment about new product development, but that's a huge focus of Spectrum Brands going forward is launching new innovative products to create news and excitement for the consumer. Price Pfister is a very fast-growing plumbing asset. We're doing terrific with it. I'm very pleased with the progress there. And Weiser is a dominant lock similar to Kwikset, although its market share is greater mostly in Canada. Our -- the next business here is our Global Pet Care business. We've been doing most of our acquisitions in that unit, and I've been promising a return to growth for a while. We actually are doing fantastic right now in our pet care business. We've got a very focused team. We've got great new product introductions, albeit the pet expo later in the, I guess, in March with the team. But if you own a dog, you need to be buying our DreamBones and our SmartBones. Your animal will love you for them. But that business, I expect to have the balance of the year tremendous growth out of pet and, obviously, very healthy margins structure there. Our Home & Garden business is our smallest unit. It's got a giant moat around it called the EPA. We do have an amazing product. They're called Spectracide. People don't like it when I say it, but I'm going to say it anyway. We do not have glyphosate in any of our Spectracide product. And so I would like you to buy our glyphosate-free Spectracide this spring to kill your weeds. That would be good for you, good for your garden and good for me. So please buy Spectracide. We also have a lot of insect repellants there. Repel, Cutter are some big brands there. We're going to be marketing and advertising those this spring as we get going into the season. The warm weather has given us a good start there. But as you know, it's a seasonal business, and the bulk of that gets done kind of May through August. Home & Personal Care has basically been in turnaround. I am thrilled to stand in front of you a year later and let you know I've got an entirely new senior management team there. And we actually grew revenue and EBITDA for the first time, I think, in 3 years last quarter. So we've kind of bottomed that out. We've got bedrock. We've got a new team. There's news and excitement coming out of there. We've got a new George Foreman smokeless grill that we're launching, and we've got a lot of receptivity from our customers. But we're pretty jazzed about turning that business around, getting it growing again, and we see some news and excitement on the horizon there. Randy will talk more about that. But that's basically who we are. So yes, I guess, geographic concentration, where post the divestitures and the deleveraging of the balance sheet, we're much more North American-centric. And today, as I stand here, I kind of like that. So we still have a decent amount of business in Europe. That's mostly related to our pet and our appliance assets. Latin America is mainly locks these days. And Asia Pacific is quite small. So in terms of revenues, we don't have any concerns really on the coronavirus side. We do have some concerns on the supply chain side. But as I mentioned, we see a week or 2 of delays, and that's all we know at this point. Our top 15 brands, these are kind of 80% plus of our revenue. And then we're dedicating our capital base in terms of -- I spent 10 years building this company through acquisitions and doing external capital allocation. Now I'm becoming an internal capital allocator and an operator. And right now, we're putting our money on these brands. And that's why I've called out particularly Spectracide and Kwikset. As we go into the spring season, hopefully, you'll be hearing that on the radio. We've got a lot of new exciting products coming in those lines. And this is what I establish, those -- I took the business over after a stumble. And basically, to me, culture is not just one thing. Culture is everything. And if you can get the culture right, you can build a team around that culture, and you can all share a vision. You can accomplish a lot together. And so really, what I wanted to do is have the business units understand who they are and where they're going. And we're trying to bring vision, clarity and focus to everything. If you look in the green there in the middle, that's the house that we are. We're building a house of strong brands. We're bringing exciting innovation, and we want to be the lowest cost. We want to attach all that to the lowest cost chassis, if you will, from an operating company standpoint. And that's why we have the Global Productivity Improvement Plan going on to make sure we're the low-cost provider in our 4 different business units that we bring -- that we maintain and we continue to invest behind our brand equity, and we bring exciting news to the marketplace through innovation. The rest of that is as obviously really important. If you know me for a long time, I've seen a couple of investors in the room that have been with me for 12 years, I've always been a free cash flow-focused individual. And I used to be an investor, and now I'm trying to become an operator. But the free cash flow side of this is really going to start to explode. And so if you like free cash flow, you should probably buy our shares because that's going to be an exciting story in the not-too-distant future. As I told you, net leverage went from 5x to 3x. That was our adjusted EBITDA. We squeaked down a little bit of organic revenue growth, and we've been returning cash to shareholders. The reason I have the target 3.5 to 4 is because I believe our shares are materially undervalued, as I stand on this stage. And we are looking to continue to acquire our shares in because I don't find an ability to allocate capital externally at any sort of metric that would reflect the returns I can get by buying my own shares. And so we're currently in the market. And if you don't like what I said today, we're happy to buy your shares from you. Our guidance for the following 12 months, we see $570 million to $590 million in EBITDA. We see free cash flow expanding this year to $240 million to $260 million. And as we wrap up the cost side of our Global Productivity Improvement Program, you're going to see that free cash flow number get really exciting as we get into 2021, but let's get there first. Returning cash to shareholders, I addressed that in my opening comments. We have a lot of authorization remaining. We obviously own a block of Energizer stock and we're quite liquid. Business initiatives. So GPIP, basically, it's a new productivity model. It's not like the old days. I think some of my old CEOs would do a reduction in force, they would take headcount down and try to make numbers that way. This is more of a dashboard. It's really looking at each person's function in the organization, the yield we're getting on that person, and it's also looking at a lot of automation. And as you guys get to know Jeremy, he's really reconfiguring the Middleton office. We are really looking to automate, create dashboards, get very, very good data in real time and make much more effective decision-making. So we're driving efficiency and effectiveness, and you'll hear more of that over the next couple of quarters. And Randy will educate you today on something called comm ops, and that's really the flywheel of trying to get our revenue going again. We believe if we can get revenue pretty consistently growing, you guys will give us a better multiple, and so that's what we're going to go do. So really facilitating the business units with the ability to grow the top line. We talked about the $100 million of run rate savings. We're going to get that in 15 to 18 months, and we're going to reinvest in the business. I mentioned it, innovation, R&D and marketing. That's the focus. That's where we're going to take those first dollars and plow them into the ground because they yield stuff like biometric locks like Halo, that's a beautiful Baldwin lock. If you don't have it, you should go get it because it's automating your house. You don't have to fiddle with your keys. Your wife will like you. You need to go buy that Baldwin, Halo, Kwikset. If the Baldwin, Halo, a lock, it's biometric. We have a lot of news and excitement in the digital lock space. Home automation is growing pretty rapidly. That's our fastest-growing segment. And it -- look at it, it's beautiful. And then I talked to you about Foreman smokeless grills. We've got some empirical evidence on Glofish, which you'll probably have to wait until the next quarter for us to talk to you about that. Otherwise, we have to file an 8-K. And we're going to start talking about this. And this actually comes from me, believe it or not, environmental safety, governance. We want to get efficient there, too. We want to use less water, we want to use less energy, we want to shrink the carbon footprint. Some of you that know me real well know that I like the ocean. We want to clean that up. We want to recycle more plastic. We want to be good stewards of our communities, society and the world at large. We still play in 150 countries. And we still have 14,000 employees, despite selling assets. So this is the first time we're talking about this, but we're serious about it. And these are some of the stats the team was able to come up with me to share with you. Through the last 3 years, we've been able to reduce our energy consumption on a per revenue basis, 8%; water, 11%. And these are annual numbers. We expect to compound 3% reduction in energy, water, et cetera. And we do a lot of things around the company in terms of -- we have some Glofish initiatives where the staff and I, we go over to Africa. We dig wells. We're providing on a sustainable basis. We clean up lakes. There's a lot of good things going on the side of Spectrum, and we'll try to do a better job of telling you about that. My first priority 18 months ago was get the balance sheet cleaned up, get strong liquidity, stabilize the business and how we're going to grow. So as you grow and you get healthy, you have more profitability. You can tackle bigger and more important issues like this. So let me turn it over to Randy Lewis. Again, I can't thank Randy enough for his contributions over the last 12 months. Randy, Jeremy, Ehsan, we've got a great team. We've got tremendous leadership in all the business units, and we're looking to have a great future. So hopefully, you guys can enjoy the ride with us.

Okay. Thanks, David. Good morning, everybody. Welcome, and thanks for joining us. My name is Randy Lewis, as David said. This is my first CAGNY conference, but I'm really excited to be here to help share the story of the new Spectrum Brands that Dave was talking about. I've been with Spectrum in the businesses for many years, but I've been in my new role as Chief Operating Officer for about 16 months. And it was about that period of time under David's leadership when we began this transformation to the new Spectrum. And I have a lot of experience in the old world. And I would say that, previously, I consider this to be a collection of good businesses that were limited and throttled by an inefficient corporate structure and short-term management. And so under the new Spectrum Brands, the mantra, what David's directive has been and what we're committed to as an organization is building a new efficient ecosystem where the business units that we hold in our portfolios actually become beneficial to the overall environment, and we're able to help them invest in longer term in the health of the organization and the brands. So today, I'm going to give you a quick overview of each of our businesses. I'm going to talk about our global productivity improvement program in more detail. I'll wrap up with just a couple of highlights on new product introductions in each of the businesses. And then we'll hand it back over to David for wrap-up. So when we look at Hardware & Home Improvement, our largest business, as David said, about $1.4 billion in revenue last year. And it's a unique collection of 3 different home improvement segments, where we have leading brands with market penetration and multi-channel distribution that provides us unique opportunity to serve across the portfolio. We have #1 positions in many of the segments. So when we look at U.S. residential, we are the #1 player in U.S. residential locks. We cover most all price points there. We produce OPP locks under a variety of different brands. And then when we get into low price point brand, our Kwikset basic line covers that. And then Kwikset Signature is a mid-price point. Kwikset Signature is founded on what David talked earlier about Smartkey. So if you haven't seen our Smartkey technology, that's partly our fault. We're not communicating as well as we should. We're going to committing to changing that. But it's a phenomenal technology where, as a homeowner or a property manager, and you have a Kwikset Smartkey, you can change your lock any to different Kwikset key blank in approximately 10 or 15 seconds. So you completely avoid the hassle of having to call a locksmith and deal with the expense. So whether it's every lock on your house, your condo, your vacation, your rental units, anything can all be key to like. So you take that as the mid-price point. And then also in the luxury price point, Baldwin also plays. So we have everything covered in that space. The foundation on security, it's about that broad portfolio of offerings. It's about the basis of the technology of Kwikset. It's also about vertical integration. We're vertically integrated on about 90% of our locks, and we have a very strong product innovation. I'll show you an example that David referred to in his slides a little bit later on, but that's where we're really focusing is on electronic and Smartkey technology moving -- or smart lock technology moving forward. When we look at plumbing, in the U.S., we're the third largest plumbing brand with Pfister. And what's unique about Pfister is it tends to take industry -- strong industrial designs and put them together with great industrial design looks and provide them at consumer-relevant pricing. While we do well in this space in the big box, we also are focusing strategically on the wholesale and builder channels, where we're gaining share quite well. And our ability to offer a combined security and plumbing is unique for many of us in the category. And so we just, last week, had a major win on that strategy, signing the largest win -- new product win in the Pfister history for Spectrum Brands ownership, combining Kwikset and Pfister with Clayton Homes, one of the U.S. largest homebuilders, where we will now be their exclusive offering for security and for plumbing in their prefab division starting with shipments at the end of this quarter. So significant revenue gains for both of those sets, well in excess of $100 million over the next 4 to 5 years. Third segment in this business is builders' hardware, and builders' hardware is where we have the #1 brand in the space. And we combine that with full assortment, where we're able to provide all of the offerings necessary to any of our retails. We also, again, have a vertically integrated supply chain here, which means that we provide market-leading quality, which is a key aspect. Brand is a tough one in this space, but product quality is very important. And then we're able to provide that with flexible distribution models that service big-box independent hardware as well as co-ops all equally. So if I turn to their next business at just over $1 billion in revenue is our Home & Personal Care appliance business. It's our most global business, with only about 40% of the revenue occurring in the U.S. And it's a little bit unique in the fact that it -- we compete with market-leading segments in both the home appliance categories as well as personal care. Our George Foreman grill is the clear leader in indoor grilling worldwide, and it's a new focus point for us for innovation, and I'll show you one of the products here later on. And when we move to BLACK+DECKER. So our BLACK+DECKER brand, currently #1 in the U.S. toaster oven market. It's been #1 for a number of years. It's a fast-growing market. We're really excited about continued growth in that space, where we're leading in the category of bringing new features into toaster oven. And so air fryers are all the craze in home cooking. We are actually meeting and bringing affordable combinations of air fryers and toasters, and we've gotten fantastic results in new listings that will be setting later this year. We don't even have that currently listed at Walmart. We got a $10 million commitment there just in the last few weeks for that starting in the fall. BLACK+DECKER also #1 in U.S. garment care. So we play a sweet spot between price and performance on irons. But what's really interesting in this space is irons has been relatively flat category, but there is a small but rapidly growing category that we are leading with innovation in handheld steamers. And this is a very high adoption with new millennial consumers expanding that category into growth again. In the United Kingdom, our Russell Hobbs brand is the clear #1 player in kitchen and home appliances. And we were -- we continue to be successful in taking share there. So when we look at our Q1 fiscal results in the U.K., Russell Hobbs grew across the portfolio at about a 9% rate against category growth that was flat to minus 1%. So that share continues. And the new team there is focusing on new strategies that are expanding that growth into Continental Europe. And so with a more tailored product offering, better channel market support and better omnichannel presence, we've had really good success there. We're over 20% growth for Russell Hobbs in Continental Europe over the last 12 months. When we look at hair care and personal care, Remington is the brand there. And so Remington has the #1 position throughout a number of hair care categories worldwide. And the current strategy is Remington playing that momentum from hair care and expanding it with strong focus into men's grooming. So one of the fastest-growing categories in the space is men's body grooming and shave. And so putting together a new portfolio of great products, we just launched a new portfolio called the Graphite Series, and we're partnering those innovative products with our global partnership with the Manchester United Football Club and putting that together with unprecedented brand support behind that. And it's resulting in double-digit growth in -- since the launch in the fall in both EMEA as well as APAC. And those launches are expected to come to the U.S. and to Latin America later this quarter -- or later this year. As David mentioned, nowhere in our business is that -- has there been more organizational change than in this particular business unit. The foundational competency of our appliance business is our ability to create new products. We have a fantastic, large, well-integrated global team of engineers who have proven skills at launching -- developing and launching quality products with true innovation in our price points. The thing that we have not been good at in -- for many years is actually applying that capability in a way that really matches up well with what consumers are wanting to buy. It was more about what technology we were able to come up with and pushing that to the market. And consequently, we were missing on a lot of our new launches, even though the products were truly innovative. And so approximately 12 to 15 months ago, we started a complete retooling of this leadership team. We've changed out the entire team, a little bit of internal talent, but also a lot of supplements from external industry talent. And they've been very effective at taking the business from operating on 5 different independent regional platforms and bringing together a global team with true focus on global strategies for bigger, better and fewer products with the right consumer insights and a strong support in the launch following. When we look at this business, again, as David mentioned, really couldn't be prouder of the progress that we've made here. It's been a really tough row for the last 12 to 18 months. But for the first time in 7 quarters, 3.2% growth last quarter on the top line organically and 4% EBITDA growth. We continue to expect those trends to continue throughout the rest of the year. So when we move on to our Global Pet Care. So our pet care business is approximately $800 million, and it's the business that's furthest along on the transformation. We've had new leadership in place in this business for approximately the last 24 months. And the unit has delivered 5 consecutive quarters of organic top line growth and 3 consecutive quarters of EBITDA growth and really starting to see the payoff from the focus on expanding margins in this space. So Q1 revenue, there were some timing issues on revenue. Revenue was up a little over 1% organically, but EBITDA was up 8%, and we continue to expect to see not that rate, but still continued margin expansion as we go forward. It's a global business made up of diverse groupings where we hold the top position in the top 4 categories we compete in. So in consumer aquatics globally, our Tetra brand is the #1 player in both food and water care in every region. And it's a powerhouse brand for us that we're starting to get behind and, again, utilizing innovation, our consumer insights, understanding how to apply innovation in a way that is meaningful to the new consumer. Dog chews, we have the top 2 brands in Good 'n' Fun and DreamBone that fill out a portfolio of both traditional rawhide and alternative rawhide. And then pet grooming, our FURminator brand is a global #1 position there. And last, pet stain and odor. So if you're -- if you have pets, you know our Nature's Miracle brand, again, market-leading in the U.S. space and one of our powerhouses in this space. It's a great category for us. Over 2/3 of U.S. household have pets. Recent data would indicate that approaching 60% of global households have pets, and the spending on pets just continues to increase. So the American Pet Products Association expects 4% growth in the U.S. this year, and that growth would be led by the fastest growing category, which is dog chews. And that also happens to be our fastest growing category, where we're leading that industry growth. So for the last 12 months in Nielsen, that category is up 6%. Our business is up 17%. Our Good 'n' Fun brand is up 29% and our DreamBone brand is up 21%. So this is the benefit of a couple of years of the transition to the new Spectrum Brands, utilizing the consumer insights, strong innovation, full assortment, really focusing on digital and omni. This has been one of the places where we incubated on how to become best-in-class and operating digitally and being able to focus. So this business unit has been on a strategy of, really, as I say, decluttering in order to invest more in the core. So if you followed us at all, you know that we've recently announced the shutdown of 4 manufacturing facilities in Latin America. We've also announced a definitive agreement to sell the manufacturing facility for our dog and cat food business to a partner in Europe, who will be able to operate that facility more efficiently. And there's lots of additional work going on here to rationalize SKU counts brand portfolios. And as an indication of that strategy success, last year, our top 8 brands in this space grew 15%. And we continue to support those brands with more and expanding IP work. So we're up to over 335 active patents in this space, 200 pending, 25 active countries around the world. And so by doing that focus and by continuing to drive on the margin, we're starting to invest that back more into advertising and promotion, as we indicated, as part of the strategy. So from 2018 to 2019, advertising and promotion in this business was up 12%. When we look at F '20 versus F '19, we're projecting to spend an incremental 12% again as we move forward with the strategy. So when we look at Home & Garden, again, as David said, smallest business within the portfolio, but still something that we feel very good about, has a very high barrier to entry. It's very high-margin business. And this is really exciting for us. As we change our strategies of Spectrum Brands, we think there's an opportunity in this space to really move from a value player and also ran to a true category leader as we are willing to make longer-term investments in innovation and consumer engagement. This business has a strong vertical integration. Over 80% of the cost of goods are produced internally, where we control that. We have the world's largest portfolio of EPA consumer pesticide registrations. And so it's a very strong [ competence ] of ours. We compete in the spaces of outdoor controls, which are insecticides and herbicides used outside the home or in the garden, indoor insecticides and then area and personal repellents. And if you combine that market together, it's a little over $3 billion in the U.S., and we have about a 28% share. We're the #1 in that space. We've been growing market share for the last 7 years consistently, and that's led by our Spectracide brand, which was -- which grew 8% last year in a flat category. And we fully expect Spectracide to be the #1 brand in this space within the next couple of years. So again, the story on Home & Garden is about extending the investment window here. So product development cycles here can range into the 2, 3, 4 year because of long-term EPA registration requirements. And so again, when we started the transition, we made the commitment to go out and retool the leadership team of this business, adding industry expertise, especially in the areas of R&D and marketing. And so combining that with incremental spend. So when you look at our investment in this business in research and development from 2018 to projected 2020, that spend will increase almost 80%. When you look at the associated advertising and promotion that goes along with the launches of those products, we're projected to increase that spend by 70% or more from 2018 to projected 2020. So we feel really good about the fundamentals of this business. Now I did mention on the last quarter call, something that I will point out, this business is highly weather dependent. And last year was a very challenging year for us, and retailers ended the year with some pretty high inventories. They also changed kind of how they were loading in this year because of last year's pacing of POS. So our POS for the -- our second fiscal quarter, starting in January, has been very strong. And it's on a very low base, but the numbers are up about 14%, 15% over the last 7 to 8 weeks. So we're feeling very good about the season. Retailers are engaging, and we're seeing them excited about this category for probably more than we have in the last couple of years. But the timing of this revenue for the year, while we feel good about it for the year, it will be different than the historical. So again, it's going to be more third quarter and back-end loaded. But again, that's an expected part of the strategy for this business. So David and I have consistently referred to the transition to the new Spectrum Brands. And central to that is our focus on committing -- or on delivering and creating organic growth through longer-term investments in the organization and in our brands. And central to that is what we've talked about for a while as our Global Productivity Improvement Program, and this is a very intensive program that's been going on for about 12 months now. I'm going to take you through some of the highlights. It starts again with creating a new operating model. So converting from a highly matrix and fractured structure to a clear new model that provides very global strategies for each business and supports it with a highly efficient organization. From there, we focused on enabling by providing a lot of feedback through supplier sourcing engagements. And so we generated a tremendous amount of savings by going through procurement here, and that savings has then further invested into the capabilities. And so this is the key of the Global Productivity Improvement Program. It's really the most important aspect we haven't talked a lot about, but it's about creating new capabilities and standardizing capabilities across the business in order to ultimately allow us to invest to grow the business. If we weren't focused on the capability and the investment, we could be dropping and driving short-term earnings much faster based upon the savings that are coming out of our supply chains. But there's 2 modes here that are very important: the investment from the savings into more activity in innovation and consumer engagement; but also then in the capabilities that I'm going to talk about on the next slides, increasing the effectiveness of those activities. And so this program is touching every aspect of our business through 6 highly coordinated work streams. We are partnering with a world leader in business transformation, who's helping to lead us through this in industry-best ways. And we've said this, and we want to reconfirm, again, we feel very confident in our ability to deliver a minimum of $100 million of gross savings off of our historical operating environment in order to invest back in to drive the business. And when we talk about capabilities, it's really around 3 main areas. I'll talk about this commercial operations in the next slide. The GBS, this is where global business services, we're partnering with one of the global leaders in outsourced global business services, focusing on simplifying, standardizing, automating and outsourcing all of the transactional aspects of our back office, many of it in Jeremy's area, HR and consumer service, et cetera. Then also, procurement. So being able to bring to the organization a new global procurement officer with experience in this space to allow us to implement new technologies and new tools to truly leverage our scale and size to ongoingly optimize our cost of goods and indirect spend. So talking about commercial operations. Each of our business units has an independent brand product and channel strategy set to support its businesses based upon the competitive advantage that it has. But there's a number of activities that they each do to support and execute those strategies that are very similar, and we haven't consistently done a good job of aggregating those across the business units. So with this, we are launching a new team of over 100 individuals made up of both top talent from in the business, but also a number of new industry experts that are bringing new capabilities to our business to help us drive this growth. So there's 4 pillars in this that we talk about. And the first is consumer insights and analytics. And this is about becoming really efficient at harvesting, aggregating, analyzing and vending information back out to the businesses, such that they know what's happening in the micro and macro trends in their space and can utilize that data to identify the true opportunities for innovation in their strategies. Second is when we talk about digital content experience for consumers, and this is a center of excellence with an internal agency, if you will, utilizing current technology in videography, graphics, 3D rendering, virtual reality to ensure that we're creating and vending out to the brands, true rich content for consumer engagement and then, also, modifying and monitoring that real-time to ensure the efficacy of it. The next piece is e-comm strategy and operations, and this is what I referred to earlier in our pet business. We've been incubating this in that space. Some of our best and brightest data scientists, many of whom have worked with Amazon directly in the past, but coming in, they understand online strategies. They understand algorithms. They're focused incessantly on ensuring set up a full assortment, single source of inventory, deployment of brand protection tools and then just relentlessly working on discoverability in this space. And as I mentioned earlier, our pet business, 49% growth in U.S. online as a result of this, and now that's being spread across the businesses. And then last is the area of revenue and profit management. So this is TPM. And again, bringing in an outside expert who stood up this process in a couple of different well-known consumer products companies, allowing us to have a completely different view of how we're spending the second largest line on the P&L after COGS, which is trade promotion, real-time understanding of ROIs and being able to go back and optimize that. So we're very excited about this. As we're very early on, the sourcing aspects are going extremely well. Overall, I would tell you, the program is on or slightly ahead of where we're expecting. And as we move into the latter part of 2021, I think this is going to provide tremendous fuel for the continued growth of Spectrum. So real quick. I know we're running short on time. I want to cover just a couple of slides on new products, and we can talk more about these in the breakout sessions, if you're interested. So for Home & Garden, again, we talked about the length of time it takes for innovation. You're going to see a lot of innovation coming in that space in the next couple of years. But with efficacy being first and foremost for many consumers, very excited about products we're launching here. So our Weed Stop selective lawn weed killer, new formulation, strongest on the market, 2x as many weeds killed as our previous version, 80% more weeds than the next closest competitor, only product on the market that controls sedge in a multi-purpose product. When you look at fire ants, if you're from the South, you know this product very well. This is by far the best product that's on the market. It can be applied as a broadcast or mound treatment. If it's broadcast, it does not have to be watered in, like all other competitive products. If it's a mound treatment, it will work within 48 hours instead of 7 to 14 days, like competitors' products. And last is ant and roach for Hot Shot, a new formulation, kills 7x faster than our previous formula, killing on parity with the market leader, but has a 12-week residual versus a 4-week residual for competitors. So outstanding portfolio here, highly supported by our retail partners as we get into the 2020 year. So Glofish, we acquired Glofish business in 2017. We've been really jumping on accelerating the research and development here. Very excited to announce the launch of our fifth species and one of the most anticipated species in the space, which is the Betta. So this is the small little fish that's sold in the small containers that you see in a variety of pet shows. To have a glow Betta was, thought to be a couple of years ago, impossible. But we've just now had the launch. It's a fantastic opportunity for us because it is a very simple fish. It's an entryway into the hobby. It connects consumers with Glofish early on, and we're very excited about this. We just got POS stats from this. Last week, our largest pet specialty partner, their rate of sale on the Glofish was 5x what their regular base product was. So we're extremely excited, and there'll be additional colors coming out later this year. David spoke earlier about George Foreman and the smokeless grill. So this is a situation where we're combining for convenience both the speed and quality that George Foreman fat reduction as well as the cleaning capabilities of dishwasher safe. So we're cooking 3x as fast as competition because it's a true contact grill. It truly is smokeless. When it launches, you'll be able to see the videos where us side-by-side versus competitors, there's no comparison. Product is performing extremely well. Every time we get a chance to demonstrate this product to a retailer or to a customer, it's a must-have product. And so this will be launching later this quarter at Walmart, 3,600 store in cap with an advertising and promotion 360-degree digital campaign. That's 5 to 6x greater than anything we've ever done in the past. And then last, I want to talk about HHI. And so David mentioned our cloud technology and the ability for us to launch new innovative products in a secure environment that removes a bunch of the friction out of the experience for consumers. So we stood up this cloud late last year. We've launched 3 products on it now. And what it allows you to do is to remotely access and control access to your codes, not having to be at the door. You don't have to fumble with the integration of a smart home hub as well as it's a single product where all the credentialing is done electronically in the cloud, instead of having to have a separate lock for Zigbee, Z-Wave, Control4, WiFi, Bluetooth, et cetera. And so we can be agnostic to that technology. And then we just added to that, with our award-winning CES announcement, that we will be able to first to market in a major way with a biometric finger touch later this year. So ran through that really quick, but now back over to David for wrap-up.

Thanks, Randy. Yes, so I talked about our leverage target. If we just run the balance of the year, we'll be about 3.6 turns as I stand on the stage today. So we've got 3.5 to 4 on the page. Organic growth is obviously our #1 priority, and we're hoping to talk to you a lot more about that on the next quarterly call. We've been returning capital to our shareholders through dividends and repurchases. We believe -- if you attend this conference and you look at total enterprise to EBITDA, we believe we're probably one of the most compelling equities you can possibly buy here at this hotel this week. And M&A, we're just doing tuck-in acquisitions that are synergistic because we can't find anything else to bolt on in any sort of reasonable price. Why should you invest in us? Well, we've materially strengthened our balance sheet. We are allocating capital, I believe, efficiently. We are returning to growth mode. Our free cash flow is starting to compound at a very aggressive and healthy rate. We do have some NOLs to shield us from the federal taxes. And we are materially increasing innovation, marketing investments and R&D into our leading brands to build barriers and enhance the equity of our brands. So look, we're on a mission to grow long term and sustainably. We're looking for low single-digit growth on the top line in 2020. Those are the EBITDA range, $570 million to $590 million. I do want to remind you that we're absorbing quite a lot of tariffs into that number, and it's still above last year. So the earnings power here is quite attractive, and we expect to have much more to talk to you about that in 2021, which is only a couple of quarters away. We have a September year-end. And then, obviously, $240 million to $260 million is the free cash flow number this year, but that's meaningfully burdened by all the expenses of our Global Productivity Improvement Plan, which will roll off in 2021, so you can expect a real spike in that number. And that's why I've been referencing the amount of free cash flow growth that we'll have as a company. But Randy was for both. So I better stop and take questions.

Go ahead. You got to get a direct way for you to get a mic.