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

Good morning, everyone. Thank you for joining us for our next presentation today, Spectrum Brands. Spectrum's portfolio includes a number of very well-known consumer brands across multiple categories, but the common theme being their use in and around the home. These include Kwikset locks, faucets, PetMatrix products, Spectracide insect killers and Remington appliances, just to name a few. That being said, we're very pleased to have with us today members of senior management, including Chairman and CEO, David Maura; CFO, Jeremy Smeltser; and Vice President of Investor Relations, Kevin Kim. That being said, let me hand things over to David to walk you through the Spectrum story.

Yes. Thanks, Adam, and thanks, everybody, for joining us today. I want to particularly thank Greg Faulkner and the team at Raymond James for having us back this year. I'm actually pleased to report to you that since we last spoke to you about a year ago, despite not planning for a pandemic, if you had bought shares of Spectrum Brands when we presented to you a year ago, you've made over 33% on your investment without dividends. So thank you for tuning in again this year. Why don't I start with a quick snapshot of our businesses? Obviously, we grew both our top and bottom line last year. We generated over $4 billion of sales and $580 million of EBITDA. And the company is now really embracing its new identity as a true home essentials company. The left side of this slide demonstrates our scale and our mix across 4 different diverse businesses. Starting with our Hardware & Home improvement business, or HHI, as we call it, it's our biggest asset, and it's got attractive EBITDA margins in the high teens. HHI does represent the #1 market share position in locks and hardware. Kwikset is our -- is the #1 mid-price point lock in America today. Our Home & Personal Care unit is our most global business. It generates -- it has generated 6 consecutive quarters of sales growth. This unit houses our world-renowned brands of George Foreman, Remington, Russell Hobbs and Black & Decker. Our Pet Care division, Global Pet Care, as we call it, it's been our most consistent performer of late. It has 9 consecutive quarters of top line growth and 7 consecutive quarters of bottom line growth. We expect that to continue. Our pet care team continues to build its worldwide marketship leader position in core categories of aquatics, dog chews, pet grooming and pet stain and odor. Home & Garden, last but not least, is our smaller business, but it's also our most profitable business. It's got a significant moat around the business called the EPA. We do have an amazing product lineup as we continue to tell our story about brands such as Spectracide, Cutter, Hot Shot and EcoLogic. We also believe that our geographic concentration is actually a competitive advantage. 3/4 of our business in 2020 were -- sales were generated from North America with 17% of our sales coming from Europe. I'd like to get you to turn to Slide 6, I believe it is, the next slide. Our brands -- as a home essential company, our brands are critical to understanding our company, Spectrum Brands. We believe we're better positioned today, quite frankly, than we've ever been to drive demand as a home essentials business. With consumers needing and desiring our brands and products more than ever, we've been investing pretty heavily in consumer insights, innovation, marketing. And that's propelling our brands and products to new heights. These reinvestments are targeted at our top 15 brands, which actually represent about 81% of our revenue. And we're driving stronger organic growth for our company across the board. We will continue to focus on executing our new operating model, leveraging our strong manufacturing and distribution footprint. If I could have you look now at our -- the slide that contains our, let's see, our mission, our strategy. We use consumer insights to fuel innovation. And in 2021, we took the opportunity to refresh our mission and to refine our strategic framework. Spectrum Brands is truly a home essentials company, and we're focused on delivering products and solutions in and around the home. Simply put, our new mission is to make living better at home. We use consumer insights to fuel innovation. This drives our new product development. We've got long-trusted brands that provide newest solutions to improve the way people live their lives at home. And ultimately, we bring excitement to our consumers. Now that we're structured for growth and efficiency, we can really focus on the consumer, the customer and stakeholder around the world every year. We're led by our values. Our values, our trust, accountability and collaboration, and we want to serve others through this common mission, making living better at home. So we believe this represents an inspiring, a purposeful and a clear vision of who we are at Spectrum Brands. And these values that we provide to consumers and customers and employees are really what gets us up in the morning. To support this new story, we've updated our Spectrum Brands logo, We Make Living Better at Home, and it reflects our mission and purpose. If I could just point you to the next slide, should be growth drivers. Thanks. We've been talking about this strategy now for a couple of years as we launched a global productivity improvement program 2 years ago. And this is working now across all our business units. We've been investing in technology. We want to quickly discover, and we want to convert consumer insights. And we want to know what do they want; what do they need; what are they buying today; and more importantly, what are the market trends and big data tell us about where they're going to go, what do they want to buy tomorrow? And so we've now got a consumer insights and analytics team. We call it our CIA unit. That is inside of our commercial operations business functions. And it's helping us collect and analyze not only our own data, but also customer data, industry data to help us really make better decisions regarding our portfolio and also our go-to-market strategy. So with that insight and consumer insights and the CIA team, the analytics, we continue to fund innovation. So we're developing new products and solutions in and around the home. Recent examples of some of our innovative products include our Kwikset locks with Microban technology. Obviously, in this era of COVID-19, to be able to have a Microban coating on our locks and door handles, it fights bacteria growth on the hardware. Our Halo Touch smart locks, those use your unique fingerprints to lock and unlock your doors. So it's biometrics. And just this past year, during COVID-19, we expanded our portfolio into Nature's Miracle. We launched a disinfectant product line. And with our Cutter brand, we launched hand sanitizer, launching additional cleaning tools for homeowners through our trusted brands that are already in our consumers' homes. So this type of innovation is really what we want to continue to drive and to delight consumers with and build our brand equities as we go forward. Innovation is critical to growing our trusted brands as is investing in advertising and promotion to tell our exciting story of innovation and to drive our growth further. Over the last couple of years, we've ramped up our investments in marketing and digital advertising. For one example, we stepped up our A&P investments in 2020 by over 45% to about $50 million. We're getting very good returns on these advertising investments, and so we're going to step that up, and we expect to invest about $70 million this fiscal year, fiscal 2021. Our Comm Ops and marketing teams, they've built strong and cohesive omnichannel presences, and we're -- this is really reaching our targeted consumers. And so we're investing in new content to speak to those markets and those consumers. Our supply teams have really had their hands full over the last 12 months, but they're working to make our products much more accessible and affordable around the world by identifying cost savings, manufacturing and distribution improvements to improve our resiliency. We've seen a lot of tests to our supply chain given the COVID-19 outbreak about this time last year, and I'm super proud of our team for the way they've managed through that. Additionally, we expanded our portfolio of brands with a few bolt-on acquisitions. We bought Omega Sea recently, and we just added Armitage, which is a pet chews business in the U.K. We added that to our portfolio last year. Ultimately, our goal is simple. Our goal is to excite the consumer. We're very purposeful here when we use the word consumer because, yes, we continue to partner with our retail customers and focus on -- even greater on the actual end consumer. We want to make sure we meet their needs going forward. And we're committed to providing new and exciting innovation that meets those consumers' needs and desires and solves problems in and around the home. So we're going to relentlessly pursue this and continue to do this in the future. And then I talked about our values upfront and the mission statement. Really, our values -- and as we talk about our values, it's really the -- it's the how behind what we do. And so we've added these 3 cultural values that speak to the overall philosophy of service and servant leadership and their trust. We build trust through our integrity. We're honest. We're respectful and we're a much more inclusive company. We're building accountability. We value our work. And so we hold ourselves and each other accountable. In collaboration, we've seen a tremendous benefit over the last 2 years as we've launched our global productivity improvement plans, as we launched the recent Comm Ops and the CIA teams. There's just been a tremendous amount of collaboration. It really makes me proud to have the privilege to lead this team as they've really come together and collaborated amazingly over the last 2 years for the good of our consumers and has really helped drive the results of the company. And we expect that to continue to happen. But we contribute to our -- we contribute both our individual unique expertise and also the experience of others to achieve unified goals, and that's what we define as collaboration. We believe we've already started to live these values today. Culture is critical to driving and achieving and sustaining success at the level we want to compete at, at Spectrum brands. And we're thrilled with the progress we've made so far, but we're also delighted to know we've got further to go. So turning to the next slide. Look, we believe we've built a competitive advantage here over the last few years, and we believe we've structured the business now for growth and efficiency. We call that our better, faster, stronger together strategy. So look, we believe we can achieve our strategy with this competitive advantage, and this is our new operating model. The change that you see here on this slide, we started with our global productivity improvement program over 2 years ago, and the model is in place today, and it's driving the results you've been seeing in our past quarters. Really, to drive growth, we're harnessing all our experience and expertise across the company to be better, faster, stronger together. Our 4 business units are focused on meeting the needs of their product categories and consumers. They're building brands. They're developing new products. They're meeting the needs of consumers with partnered retail customers. And we've developed 6 global, what we call, enabling functions, that's a new term. But these enabling functions, they work with, they enable the growth of our 4 business units and they provide strategy, processes at a global scale. This new operating structure enables us to efficiently partner with the businesses to drive the strategy of insight innovation, power through our trusted brands and to generate that consumer excitement, which continues to contribute to sustainable growth over time. You'll note, we have the word grow in this center circle with our 4 business units. And this is because the model allows us to optimize and improve our portfolio in the future through disciplined M&A with strategic tuck-in acquisitions that are both synergistic and help drive overall value creation for our stakeholders. We obviously have had a decent performance in 2020. We had net sales of $4 billion and $580 million of EBITDA. Jeremy is going to dive into the specifics for all our business units. But overall, financial performance has been steadily improving and has been quite good the last several quarters, particularly. But including 2020, it reflects major benefits from our operating model and our transformation over the last few years. So as well as reflecting the addition of significant new talent, we've upgraded a lot of talent and some really key strategic roles. Our 2020 performance included growing sales by over 4% to $4 billion, and adjusted EBITDA was $580 million last year. If we look at the next slide. This is just our recently reported quarter. Obviously, a pretty fantastic start to our fiscal 2021. The start of fiscal 2021 is seeing continued improvement in our supply chain, like I talked about earlier. We've got service levels back up in all 4 businesses. These factors help drive double-digit sales growth in every single business unit. Productivity gains have been experienced across the board, and you're really starting to see kind of the operating leverage that's inherent in our business model. As we get those volumes up and the margins expand, the absorption of overhead is better. This is leading to record growth and adjusted EBITDA, obviously, growing our sales 31% plus last quarter is not bad. And doubling EBITDA is quite good in my book. But let me give the floor now to Jeremy. He's our Chief Financial Officer, recently joined us. He's been a phenomenal addition to the team. I'm excited to be Jeremy's partner. And Jeremy and I are looking forward to continuing this momentum, and we're pretty excited about the future of Spectrum Brands. And we believe the best is still yet to come for this company. And we believe our stock price continues to be undervalued despite being up 33% from the time we presented last year. We think a lot more good is to come. And so we're happy to be here at your conference. So over to Jeremy.

Thanks, David. Good morning, everyone. If I could get us to turn to Slide 14. We'll go through the businesses here, starting with HHI. Our Hardware & Home Improvement business represents a unique collection of home improvement segments with market-leading brands, significant market penetration and multichannel distribution. The macro housing environment remains very positive across both new housing starts and the remodeling market, which is the most influential on our business. Security products make up about 2/3 of HHI sales where we hold the #1 position in U.S. residential locks with the Kwikset brand, the #1 residential lock in Canada with the Weiser brand and the #1 luxury lockset with the Baldwin brand. The strength of this segment is based on our broad product offering at each major price point from OPP to the high end. Our strong product innovation pipeline and vertically integrated supply chain support the foundation of our patented SmartKey technology, which allows a consumer or a property manager to rekey their own locks to any Kwikset key in about 15 seconds. This has led to a large installed base with approximately 2/3 penetration in new residential construction and a growing share in the area of home automation. Now on to Slide 15. HPC, or Home & Personal Care, 2020 sales grew by nearly 4% and adjusted EBITDA by nearly 6%. This unit is our most global with the U.S. representing about 40% of the revenue. And we drive globally recognized and market-leading brands like Remington, Black & Decker, George Foreman and Russell Hobbs across both the small Home Appliances and Personal Care segments. Our George Foreman brand is the clear market leader in the indoor grilling segment worldwide. The Black & Decker brand has been the U.S. market leader in fast-growing toaster ovens, including integrated air fryer technology. In the U.K., Russell Hobbs is the clear market leader in kitchen and home appliances and continues to expand share. With Remington, we are really innovating in the haircare space while leveraging our global partnership with the Manchester United Football Club. The foundational competency of this unit is its new product development capability where a large team of globally integrated engineers have proven skills in developing and launching high-quality products at affordable prices with unique innovations. Now on to Slide 16 with GPC, our Global Pet Care business. It's the leading global supplier of pet care products trusted to enhance the lives of pets of all kinds as well as those who care for them. GPC comprises a range of premium brands that hold the #1 market share position in their respective categories, including dog chews with our Good'n'Fun, DreamBone and SmartBones brand; dog and cat grooming with FURminator; pet stain and odor with Nature's Miracle; and aquatics with Tetra, Glofish and Omega One. These well-recognized brands are available globally across all major channels, bolstered by efficient speed to market and innovative solutions strategically geared to address the needs of pet parents. From dog chews that capitalize on human food trends to one-of-a-kind dog and cat de-shedding tools, vibrant fish species and superior fish nutrition, GPC's focus on developing and leveraging unique IP has elevated its brands into necessities that pet owners depend on. As more and more people bring pets into their homes and increasingly treat their pets like members of the family, these brands should continue to enjoy sustained demand and growth for years to come. Now I'll switch gears to Home & Garden on Slide 17. H&G is our highest-margin business and generated 2020 sales growth of 8.6% and EBITDA growth of 6.2%. It's the largest provider of retail pest control products in the U.S. and has a growing presence in Latin America. With some of the fastest-growing brands in the category, including Spectracide, Cutter, Hot Shot and EcoLogic, our business is #1 in several key areas, including outdoor insecticides, mosquito area repellants, indoor foggers and bedbug control. The outdoor herbicide and insecticide segment is H&G's largest. And the Spectracide brand is leading the way as we outpaced the category growth by a ratio of 4:1 over the past 3 years. This year, Spectracide launches its new Flip and Go Sprayer technology, delivering consumer preferred, one-handed convenience for its bug-stop barrier spray. In the household insecticide segment, H&G has also outpaced the category where its Hot Shot brand gained share through ant, roach aerosols with its unbeatable new formula. Finally, in repellents, H&G grew 4x faster than all major competitors in 2020 driven by the Cutter brand and its new protection people consumer engagement campaign. H&G's momentum has become possible through a distinctive combination of brands, EPA registrations, efficient manufacturing and strong retailer relationships. With a transformation mindset, H&G is leveraging insights and new ways to develop consumer-preferred products for millennial and Gen Z consumers and to communicate to these consumers how we can help them conquer nature's challenges and enjoy life. Now we'll shift gears a bit to Slide 18 to discuss our internal growth and efficiency efforts through our Global Productivity Improvement program. This program was started over 2 years ago, as David mentioned, to reimagine all aspects of our business to ensure that Spectrum Brands is bringing real value to the businesses within our portfolio. We created a new operating model that David discussed earlier where enabling functions provide best-in-class services that allow business units to concentrate all their efforts on knowing and delighting the consumers in their space. Along the way, our efforts to improve efficiency and effectiveness in many areas will deliver substantial operating savings. By the end of fiscal 2020, we had captured over $90 million of gross savings, and we remain on target to achieve at least $150 million in total savings by the end of this fiscal year. We also remain resolute on using these savings to reinvest back into the businesses to deliver long-term sustainable organic growth through enhanced innovation and consumer engagement. This program is our most important strategic initiatives as we continue our transformation journey. Now on 19, our GPIP program contains specific efforts to strategically invest in many key areas. We focused on efficiency and resilience in our supply chain by adding capabilities in planning, sourcing and distribution. We redesigned the front end of our business operating model to focus on consumer insights and using data to drive scale, best-in-class approaches to e-commerce and content analytics. We're developing the capability across all 4 business units around data-driven white space analytics to ensure future growth opportunities are identified and prioritized. And we are focused on technology enhancements and talent upgrades in all aspects of the enterprise resource planning process and adjacent modules. In short, we're looking to ensure the long-term sustainable success of the business. While we have completed the majority of the structural and standup work within our GPIP project and we have already realized much of the cost benefits, we're just beginning to generate benefits from many of the growth enablers now. That's one of the reasons that we are so excited about the future for Spectrum Brands. Flipping to Slide 20. One of the major growth enablers of our transformation was the creation of our Commercial Operations team. Our Comm Ops organization is a Spectrum Brands-wide center-led team of subject matter experts dedicated to improved development, governance and execution of our commercial strategies. We are leveraging new tools and consumer insights to ensure we maximize the SPB consumer experience throughout their journey in our spaces. The team brings a single source of truth about the consumer to our overall portfolio and ensures growth through value creation in each business unit. This team is an enabling function for all business units and acts as a governing body of alignment and collaboration for the greater business. Four pillars of subject matter experts across insights and analytics, digital marketing, e-commerce, sales and operations and revenue optimization partner with the brand and product experts of each business unit to drive growth. The unique structure has centralized and brand-dedicated resources operating seamlessly throughout the organization and can be easily scaled and redirected to meet the changing needs of the business. Our commercial execution and results have clearly improved as this model has begun to take root across the broader business. Operating at a high level on Slide 21, the Comm Ops team invigorates brands with what we call our flywheel of growth. Everything we do starts with understanding the consumer and using data to develop deep insights about the markets we participate in. We then engage at all levels of the consumer journey with compelling tailored content. From there, we drive for the moment of truth with the consumer, leveraging analytics tools to optimize discoverability of our products and drive conversion. This gives us the opportunity to analyze these revenue streams for optimal ROI on our engagement and promotional activity while ideally maximizing price. This ultimately leads to new insights in consumer behaviors, which adds to the momentum of the flywheel all over again, a unique operating model dedicated to long-term sustainable growth. Now we'll flip to 22 and take a look at a quick reminder of our 2020 performance overall. Our balance sheet ended the year strong with net leverage of 3.4x and over $1.1 billion in total liquidity. This represents over a half turn of net leverage improvement in the fourth quarter. Our adjusted EBITDA grew 2.3% as reported, and our fiscal '20 net sales grew 4.3% over fiscal '19. Turning to fiscal '21 and our earnings framework on Slide 23. Based on our strong start to the year, continued discipline with our GPIP efforts, including our reinvestments back into the business, we are confident in our earnings framework for 2021, which reflects high single-digit net sales and adjusted EBITDA growth and adjusted free cash flow of $250 million to $270 million for the year. Now on Slide 24, a quick update on our capital structure as we've been active in the market the last couple of weeks. 2 weeks ago, we launched a $900 million refinancing, issuing a $400 million new term loan B and $500 million of 10-year senior unsecured notes. The transaction is leverage-neutral on a net basis. The funds will be used primarily to tender and call our 2024 senior unsecured notes in full and tender for over half of our 2025 senior unsecured notes. We're really pleased with how the refinancing was received by investors. From a debt maturity standpoint, our nearest date of maturity is in 2025. And overall, we would expect interest expense and cash savings in the double digits from this overall refinancing. On 25, from a capital strategy perspective, our capital allocation priorities continue to focus first on allocating capital internally to our highest return opportunities. This includes strengthening our brands through R&D, innovation and new products and advertising and marketing to drive vitality and profitable organic growth. We will also prioritize returning cash to shareholders via dividends and opportunistic share repurchases and being disciplined with M&A through strategic tuck-in acquisitions that are synergistic and help drive value creation. Our near to medium-term target net leverage range is 3 to 4x. Finally, on Slide 26, our performance over 2019, 2020 and our earnings framework for this year reflects the importance of consistent execution, investing back into the business to drive sustainable long-term growth with long-standing retailer relationships. Additionally, we have worked diligently to strengthen our balance sheet and remain steadfast in our net debt-to-EBITDA target of 3 to 4x as well as maintaining ample liquidity. As David detailed, we remain focused on our GPIP efforts and keeping the flywheel of growth moving in the right direction for our long-term stakeholders. We thank you for your interest in Spectrum Brands. At this point, I think we'll turn it back to Adam for questions.

Okay. Great. [indiscernible] video open here. Thanks for the detail, David and Jeremy. If I can ask a quick follow-up here and maybe just take a little bit of a step back [ and put some ] context. Maybe how you progress your operating model? Largely speaking over the past 2, 3 years, you both touched on Global Productivity Improvement Programs. Maybe more on that, just kind of how you guys have developed a model over the past couple of years.

Yes. Look, I think it's pretty simple. I -- my involvement with the company started in '08, '09. I basically spent the first 10 years in the Chairman role doing M&A. And we built a big and a very prosperous company, and we returned about 30% a year to our shareholders for a decade. When I took this new role on -- as the CEO of Spectrum, basically, my priorities switched from being an external allocator of capital to allocating capital internally. And what I saw internally was a need to create capital to free up capital so I could invest. And I wanted to inspire, empower, encourage and put capital into the business units so that we could compete and we could grow faster and we could take market share and we could have products that were exciting and we could sell those products at higher margins because they were innovative and brought a real solution to the consumer. In order to do that, we had to create a flywheel. And so we launched the Global Productivity Improvement Program, but we did it using big data. I didn't want to resort to what typical CPG companies do as they go and they order RIFs, reduction in force, they fire a bunch of people, try to create some dollars. But there's a much more intelligent way to look at how you're allocating capital internally, and I recruited a phenomenal C-suite of executives and some consultants to help us build a dashboard to say, hey, how are we allocating dollars internally, how can we allocate those dollars much more efficiently and basically, how do we feed the root of the company if we're going to produce really good fruit. So everybody wants investment returns. Everybody wants to grow sales and grow margin, grow EBITDA and drive the stock price. But if you don't do the very fundamental stewardship of investing in consumer insights and really allowing that to fuel your decision-making on what new products you're going to develop and launch. And then you don't follow -- and then you need to follow up with marketing and really communicate the story of why your product has better efficacy, better value, better application, whatever, but you need to tell that story crisply and succinctly to the end consumer through advertising and promotion. And then you can -- then you create this different model. Our old model is me doing acquisitions and the team getting stuff listed and praying to God it turns at a point of sale. The new model is very much consumer insights, driving new product development and innovation, creating amazing products that really solve real-world problems in an exciting manner that allow us to charge more for those products to lift our mix, to get better utilization in our plants and have consumers pull the product. So yes, we're very, very good at distribution, but it's much more rewarding to me to actually have the end consumer go to my customers' store or website or wherever and say, I need this product. This Microban-covered Kwikset lock that I can change myself in 15 seconds is the one lock in the market that's going to protect me from COVID-19. Wow. I want that. And so that's the new Spectrum Brands. We're passionate about it. That flywheel is in motion, and we -- we're excited about our future because of it.

Great. That's very helpful. If I can ask a follow-up, kind of switching gears a little bit to e-commerce. You guys obviously put up an impressive number in the December quarter. So maybe just your outlook there. You had a goal as a percent of sales, wasn't really something you're thinking about. Just some additional initiatives you're thinking about on the online side.

Jeremy, I'm going to throw that over to you, if you don't mind.

Sure. Yes. Look, the first quarter was great. We have a mantra inside of Spectrum Brands, we want to be wherever our consumers want to be when they make those decisions. So we are less focused on exclusivity in any channel, and we want to be present in every channel with all of our brands, and that's really the strategy we've employed now. That led to what you saw in the first quarter, which was 54% growth in e-commerce year-over-year, essentially double the organic net sales growth of the total business. We don't have a specific target because we're not trying to push consumers on where they make those decisions. We're just trying to be in all those channels. In total, in F '20, I think 16%, 17% of our total sales were e-commerce. Likely with the trends we're seeing in the first quarter, which we would expect to continue, that's going to move into the 20% range, maybe a little heavier. It'll be dependent on how the second half of the year plays out. The good news is it's going back -- before I got here 3 years ago, I think David and Randy agreed to invest in our e-commerce sales and operations before we even started GPIP and hired strong data analytics talent, set up a new office in Austin, Texas where a lot of that talent exists and hired some people out of some of the folks who are existing e-comm customers, and they really have led the charge to make us not only maintain share as more of our consumers shift that decision-making online, but actually gain share. And we've done it in a way that has been essentially margin-neutral, which is also fantastic.

Great. That's helpful. So as a follow-up on how margins [indiscernible], but...

I could read your mind, Adam.

I know. That's very helpful. So I guess I was curious, but obviously, you guys put up impressive results last year and guidance for '21 indicates a continuation of your progress. So I guess maybe how confident are you? And I know it's a difficult question. We won't maybe hit some sort of air pocket this year or maybe just major business [ kind of ] obvious that you're thinking about kind of for the balance of the year.

Look, I think we've put the right building blocks in place. We've got operational momentum restored to the business. I mean 3 years ago when we lost momentum, it's very hard to restore that. But once you get it back, we've got a team that's invigorated. We've got a new culture here at Spectrum. We're a much more productive company. We're built for growth now. Look, I would say if I look over the last 3 years, the main operating challenge in the first year was the tariffs coming at us. The second year of this program was COVID-19, which we're still dealing with, but the team proved amazingly resilient. We had a few supply chain issues March, April of last year, and we've recovered from that. So fill rates are up. Book demand for our products remains fantastic. Everything we do is in and around the home, whether it's making your lawn bug-free, whether it's treating your pets, whether it's securing your properties or cooking at home with our Foreman grills or in the U.K. with Russell Hobbs. So look, we've got great brands. We've got great people now. But this flywheel of growth is really intact. I think, look, we're trying to be cautiously optimistic because we do see input costs as I would -- if I listed kind of the tariffs and COVID, I would say, in the third year of my tenure as CEO here, we definitely have some input cost inflation that we're dealing with and trying to offset at the moment. But our business fundamentals remain exceedingly strong. Demand for our products remains exceedingly strong across the board, and we're pretty excited about our future. I think I told you the first time I attended a Raymond James event that last year that I viewed our stock as materially undervalued. And look, it has appreciated some 33-plus percent not including dividends since that meeting. But I would stress that to you again. I think we are looking at an environment, whether it's the private equity market, the stock market, there is so much liquidity in the marketplace looking for assets. And we're not an EV auto company, but we're a Steady Eddie player. We've got great brands. We generate a lot of free cash. We've restored growth to our top line. And our company continues to trade at a material discount to its intrinsic value. And so we are going to continue to drive this business until we believe the market properly rewards us with the multiple we believe we deserve. But we're bullish about the future.

Thanks, David. And with the discussion of the valuation, I think it'd be helpful, with a couple of minutes here, just to segue into putting a bow on capital allocation, your priorities. Jeremy touched on that. Just kind of how you're balancing repurchases versus debt. I know your 3, 4 net leverages, that's all within your comfort. So maybe how high you'd be willing to go for the right deal and how valuations are out there versus buying back stock. Just kind of how you're weighing all your opportunities right now.

Yes. Look, there's no question, right? I mean Jeremy walked you through the capital allocation priorities and investing internally for growth is there and paying dividend. The last time I attended the Ray J conference, I personally was buying shares. The company was buying shares at the $59 level. We are still materially multiple turns of EBITDA below our comp set. I think the company now is starting to demonstrate enough consistency in earnings growth, revenue growth. I mean all my banking for install, boy, once you get your growth rate consistently above 5% on the top line and your EBITDA margins are expanding and you pay down your debt, you should go back to 12x EBITDA. And we're trading here today around 9%. That's up a little bit from last year, but not a whole lot. And so frankly, I think we've got a lot more multiple expansion to come. Some of our business units have phenomenal margin structures and free cash flow conversion, almost all of them. And so as I look at the world today, the cheap cost of capital has made acquisitions exceedingly expensive. And so I think anything large, I'm just not -- I'm not looking at that right now because my own stock is the cheapest thing I can buy. And so I'm trying to balance that with the leverage ratio that everyone wants me to keep driving lower. We do generate a lot of free cash. We did buy back -- Jeremy, correct me if I get the number wrong, but I think I bought about $40 million of our own stock back recently in the last quarter. And so we continue to view our shares as exceedingly attractive, and we will probably allocate more capital there than anything major. I think we've been pretty consistent in saying when we can get a tuck-in acquisition where it's in one of our verticals and we not only believe it's going to create a lot of value but frankly, we can buy the multiple down because it falls into our wheelhouse, it's kind of what I call a plug-and-play tuck-in, then we can get rid of certain nonessential costs that quite frankly buy that multiple down that make it accretive to our current trading multiple. But I wouldn't -- we're not going to do anything big until I get the stock price materially higher and the multiple more reflective of the underlying value.

Well, I'm not showing anything in the chat box. And it looks like we're just about out of time anyway. So thank you, gentlemen, for taking the time. We always like to have you at the conference and hope everyone has a great rest of their day.

Thanks, Adam. Appreciate it. Have a good day.

Thank you, Ray J. Thank you, everyone, in the audience. Thanks for your attention and your time. We'll talk to you soon.