The Scotts Miracle-Gro Company (SMG) Earnings Call Transcript & Summary

It's good to see -- I've seen a lot of faces that I haven't seen in a while. So welcome to our place. I think this is a little bit like giving a tour of a house, especially house you like. So the thing about this campus is, the CEO's office is like the oval office kind of and people come to brief and get decisions made. And I'll go through weeks where, the only like -- I'll be lucky if I say to somebody, "Hey, can we meet the hallway and just walk." And that's how I get out, you get out of the office and you see what is going on here. It makes you pretty proud to understand this company. And I think that's a little bit what we'd like to impart on you guys today. This is our place. This is our home. And this place is the center of the lawn & garden universe. After we merged Miracle-Gro with Scotts, I had this idea we keep Miracle-Gro in Port Washington. It kind of preserve my options to -- as a New Yorker to not have to move here. So I figured we kind of keep that option open. And what happened was having one of our key brands, not in the center of the lawn and garden universe, meant that the brand people couldn't have launch together, a lot of the things you benefit from having the team together didn't happen. We've been here in this town since 1868. And that's another reason we're not in New York or Vermont, where I live now is we're in the same place we were founded by OM Scott when he got back from the Civil War. And from the time that OM Scott started this business, which is about grass seed, we have been a market leader since 1868, and that's, I think, pretty rare. In '95, I merged Miracle-Gro and [ Tescos ] and we -- the business became like a way better business. Later, we put Ortho, Roundup, Tomcat on there, and we have become the sort of undisputed leader of the lawn and garden category with really iconic brands. Our brands are license. That's our ticket with the consumer is that, if you take our brands and our ability to fulfill that is like a very special thing for us to be able to do, take the brands, the ability to execute the sales force, just the relationships, there are probably, I would say, Behr paints and Scotts are like critical vendors in store who like do the work. I hope when we're done that we have like traded some enthusiasm with you guys, and you understand what a special franchise we have here. Okay. It's a profitable -- I like it, I wrote this on the airplane on my way home last night, and durable consumer goods company, in a very unique and important category. I would have told you the results today wouldn't have required a halt. But Nate was like, "No, man like 2 weeks, wait for the call." So what I was going to say is, in a nutshell, we very comfortably got through the quarter, very comfortably, okay? And we're -- what we need is a special release now. I was told those words were okay, and we're very confident the years in hand. So if that is any help. Other than that, you're going to have to torture it out of Nate or -- he was one that let me do whatever I wanted. That was the good news. Anyways, so Nate you're up.

All right. Thanks, Jim. First of all, good morning, everybody. Thank you for making the time to come to Ohio in the middle of the summer. I think what you're going to see today is the beginning of SMG 2.0 -- picking up didn't really take much convincing for me to take this role. Working for 150-plus year-old iconic American company and being able to support those brands and bring an outside perspective was a challenge that I was 100% up for. It was really, as Jim said, sort of my wife, who I had to convince and she's here and she's happy. When you look at us, what do we do? We bring joy to people. And Jim talked about all of our superpowers, our manufacturing, our distribution, our brands, our sales force, but what that all really is, it's about bringing joy to the consumer. And I think we learned a lot during the pandemic about who the consumer is. There's a lot of stickiness there, and we're going to continue to lean into that. We also recognize the consumer is changing. So what my team is going to show you today is how we're evolving. And if I go back to the springboard, you can't take $300 million out of the business and have everything run smoothly underneath the hood. You just end up with people, lack of clarity and roles and responsibilities, critical skill sets, they are gone. So one of the things that is going to be a common thread throughout this is the people. Because it's the people that matter and it's the people that have the passion, and we want to inject more of that, and I'll talk a little bit about that later. So we're going to outline a 3-year strategy that really set us around how we lean into the superpowers that we have. It's not a hard story on the margin recovery piece. We will get there, but it starts with the people in the organization. And so coming in a year ago, I knew where the company was, but coming in as an operator and seeing it -- it was shocking. We just -- we had to let a lot of people go, and it was really hard to run a business. And so think about our ability to run a business when we have a bunch of holes in the organization. So what have we done? We've done a couple of things. We've made sure that every employee knows what the North Star is, and I'm going to talk about that in a second. We started implementing sort of fast and light approach. I know we're a biggest company, but we really want to behave like a startup. So we introduced sort of an agile approach to how we solve problems. I would say we're almost a year into that and the culture has changed. When I go out to a plant and I hear a plant manager tell me, he's got an agile team to help them improve production. I think that success. We're now moving into the second phase, which is how we evolve the organization, how we make sure our associates understand what their role is, how we inject some new fresh talent into the brands and the marketing side, which is something we're in the process of doing. We're going to organize around three business units, controls, gardens and lawns. But all of this comes down to investing in the brands and investing innovation. Consumer is the tip of the spear. And I would argue that, between the pandemic when it was all hands on deck. In the last couple of years, we were very retailer focused because we needed those partners to help us get through this. We lost sight a little bit about -- on the consumer. And so what you'll see moving forward is a very clear focus on consumer first, brand, innovation, everything else is there to support that. Jim mentioned technology. I'm a tech guy. I don't want to overemphasize it, but you'll see elements of that throughout the presentations today. I would say, in general, we are not doing anything like we were 12 months ago, and you'll understand what I mean when the team talks about it. But we are leveraging technology. Data is king. A company of our scale, leading lawn and garden, the category. We are in a position to collect that data, whether it's in partnership with our retailers, whether it's through our own sort of 1P data acquisition. We're also hiring data scientists. We're starting to look at how we can use simulations to understand where the markets are going on a week-to-week basis. And I was telling a couple of folks earlier. We use that to great effectiveness this season. We moved on the order of hundreds of thousands of dollars around on a weekly basis in terms of where we targeted regional media just because we knew that something was going to work, say, in the Southwest this weekend because of weather or some other factors. So we're getting better, and you'll see elements of that. The retailer relationships are extremely strong right now. Josh is going to talk about that. But Jim's right, we flew down, had dinner with Ted and Billy. We have great relationships with all the retailers. We are partners. I do not consider ourselves a vendor, and I know they see it that way, too. Supply chain, always been a super power. You're going to see the transformation and a ton of cost out. I've challenged the team with a pretty big number, and you'll see that number today. Between the supply chain cost outs, between our ability to take selective pricing, and I don't mean large-scale blanket pricing, but we now have the tools again, going back to the tech stack that we're building, that allow us to pinpoint with precision, elasticity on a SKU-by-SKU basis, and we know where we can take a surgical pricing and then there's innovation. The greatest way to gain margin is to introduce new products as the consumer needs that you can charge a premium for. So all of these things together efficiency, pricing, new products, supporting our brands, that's going to lead to that crawl back on margin. And I'll just leave you with this. Exiting May, the lawn and garden category was down 3%, we were 4%, okay? So of the performance we've had this year in a year when the category is down and when retailers are struggling with footsteps, that really says a lot about the power of our brands. We invested 9% more in our brands in media this year, but we also invested those dollars differently, and I guarantee you've seen that. I don't think anybody in this room hasn't seen that advertising. It works. We must support our brands. Jim is right, we are not a low-cost operation, but we are driving the category, and we have to continue whether it's from the brand or on the innovation side. All right. I'm going to close here. I just want to talk about people for a minute because culture is extremely important. It's the people that make this business work. It's not our processes. One of the first things we did sort of exiting '23 would say, "Hey, we need to put together a clear North Star." And this is an internal document. This is something we put together called the journey to balance top and bottom line growth. And I'm not going to go through it. But I want to just read the vision because it's a slight tweak on what we've published externally, just so that this drives some of the impact of the people. Our vision to help people of all ages express themselves on their own piece of earth our actions as a company and as individuals are guided by our cultural attributes, every day we ask ourselves, what would a good company do, and then we set out and do it. That's really important. That is what's going to make this work. So I'm going to turn this over. But before I do, I'll let you know that part of the goody bag, we use something around here called Challenge coins. It's a great tradition, I did it in my old world, and I'm glad it's here. I created a challenge coin that really focuses on excellence in action. It comes from the office of the COO. Each of you are going to get one of these in your goody bag. But when you take this away, just remember, it's the people here and the passion of those people that are going to drive this business. Okay. I'm going to turn it over to John Sass our Head of Creative, and he's going to share with you the journey we're on with our brands.

Good morning, everybody. Thank you, Nate. As Nate said, John Sass, I'm our Chief Creative Officer here. And I'm thrilled to be able to talk to you a little bit about our approach to advertising and marketing. And I got to tell you at the start, me and my team get the unbelievable privilege of being able to create and deploy all of the advertising that you get to see for these brands. Everything from the big time national TV campaign that airs during March Madness, to the Instagram post that shows up on your phone down to the banners that hang over top of our displays in the stores. We get to touch it all, and that's truly a fun job to have. So over the course of the next couple of slides, a couple of minutes, I'm going to share with you a little bit about our approach. And of course, I will show you a TV commercial as well. Here's a picture of Horace Hagedorn, one of the co-founders, as you know, of Miracle-Gro and a true marketing expert. His philosophy and his approach to products and advertising was pretty simple, find a need and fill it. And that's exactly what we do here at Scotts Miracle-Gro and frankly, arguably better than anybody else in the lawn and garden category. But as Nate just mentioned a moment ago, everything we do starts with the consumer and having a consumer-first mentality in everything we do. our collection of brands, our portfolio of products give us the solutions to solve nearly every product or every problem that a consumer has in their lawn and garden. But better yet, we actually have everything they need to create a space that they love and enjoy right in their own backyard. Because a lot of people come to this category clearly and buy our products, not because they have to. Many of them buy it because they want to. This is a category that is -- that consumers engage with because of passion and enjoyment. And that's not something you get with a lot of other categories or a lot of other industries. That's something that's pretty powerful and unique to lawn and garden. But we don't take that for granted. We spend a lot of time making sure that we truly understand our consumers. We want to make sure that just not their interest and their passion in the category is what brings them back. We spend a lot of resources, making sure that we know our consumers know what they want, what they like, what they're looking for in products, both today and tomorrow. And those are the insights that you're going to see that we turn into product innovation and you're going to get a chance to see here later today. So what do consumers want? Well, let's be clear. At the end of the day, the products have to work. They want products that perform regardless of who they are, how they come into the category, if you're an expert or a newbie, the products you buy have to perform. Product performance is paramount to everything we do. But where they shop, what's in the product, how they recycle the packaging, those are the things that we're starting to see differences with consumers today. So for each of our brands, we spend a lot of time and resources digging in and really segmenting our consumers. You could see on the screen here, some of the segmentation that we have. And when we do that, it truly allows us to dig into those consumer behaviors and solve and create products and solutions for them geared to what they are looking for, to really solve their unmet needs. So if you look at the slide here on the left side, you have our conventional core. These are the consumers that we all know, right? They tend to be a little bit older, they have the time and they have the money they gauge in the category. They are a tried and true consumer base. Big time DIY shoppers, they go to the big home centers. They are the weekend warriors. They pretty much know how to tackle their lawn and garden problems. They don't need a ton of handholding, but they do need that reminder every spring to get out there, and it's time to go. If you compare that to the segments on the right here, you can see I called out two of our segments for our biggest brands, Scotts and Miracle-Gro. These consumers at the end of the day, still want products that work, but they're also concerned about things like sustainability, naturals and organics. Or maybe they want to buy Lawn and garden products at a place not at a home center. Maybe it's at Costco on a Wednesday night on a grocery trip or maybe it's even right off their phone from Amazon. So -- having solutions for these consumers is super important, and that's also something we do. You're going to get to hear a lot about some of these innovations, but I'll highlight for you and you could see on the screen, our new organic line for Miracle-Gro, which is one of the great new solutions. And we have a new innovation coming next year from Scott also solving that sustainability and natural organic solve that consumers want on this side of the house. In addition to the products, they also need a little extra handholding. These consumers on the right aren't as educated on lawn and garden, so they need extra tips. They need the guidance and support, and that's where these brands come into place. I joked with Jim a lot, but there's probably a lot of marketers in the country that would love to switch places with me and have the chance to be able to market these brands you see on the screen. Iconic brands and our biggest flagship brands have over -- they have massive awareness levels over 75% that rivals some of the biggest brands in America today. And you don't reach those levels just by overnight. We get there through sustained support and advertising investment in our brands. Because advertising, investing in our brands is fundamental to GDR. Could you turn that down it there, Yes, I'll keep talking. Advertising in our brands is who we are, and it dates back to 1951, you can see this left side of the page here. This is the print ad that Horace put out for Miracle-Gro. Horace was doing direct-to-consumer before, it was even direct-to-consumer, but he knew fundamentally advertising and driving the brands is what works. And year in and year out, we've had that sustained commitment to advertising for our brands. It is how we go to market each and every spring. Now as Nate alluded to, we do make a lot of adjustments each year. We obviously are making sure that our marketing plans are delivering to make sure that we have efficient plants that can reach consumers where they're at in each given market but we also free up the big time campaigns to launch each spring and excite consumers about lawn and garden season. Jim mentioned and Nate did as well, like you -- hopefully, you didn't miss any of our advertising this past spring. And in fact, we even made adjustments going into the spring to put even 30% more into that spring part of our season. big time advertising campaigns to really kick off the season, which I'll show a little bit more here in a second. But once we launch those, we don't just sit back and wait. We're using our tools and analytics to make sure we can adjust our media, as Nate alluded to, and each week to make sure we're deploying the right message in the right markets at the right times. We're constantly monitoring and we're constantly making adjustments. But powerful plans also need powerful creative as well. And I'm going to share with you and highlight three of our campaigns, all rooted in those consumer insights that drive our biggest brands. Our roundup campaign, this stuff works. It's pretty simple, pretty powerful. How did we get there? Well, when you talk to consumers, weed control is a constant problem. It's a battle. Every time they go out, weed just keep coming popping up all over the place. it can seem like a never-ending battle for consumers. So we ask them, why do you buy Roundup and they told us, play back for us because it works, every single time. Roundup works. It's so powerful get so simple, but ownable for this brand so much so that we made an entire campaign and that's what you see on the air today, "Roundup, this stuff works." Hopefully, you've also seen a chance -- I had a chance to see this guy on TV. This is our passionate campaign for Scott's brand with our feature character here, Arlon Guru, Scott, better known as Scotty around the office. Scott is played by famous actor, Christopher Hivju, known in his role in Game of Thrones. This campaign really addresses all those new homeowners that came into the category since COVID. There's a lot of people with homes, and they just don't know what to do when to solve their lawn problems. Well, that's why this campaign is so perfectly lined up. because Christopher, Scotty, always seems to come in at the right time to solve consumers' needs, tell them what to do and their lawn to get a great result. And of course, he knows the best solutions are always Scott's products. And finally, speaking of celebrities, hopefully, this past spring, you all got to see this on the airwaves. But this is our newest campaign from Miracle-Gro on our organics line, featuring Martha Stewart. We launched this campaign this past spring based on the very fact that Martha used our Miracle-Gro soil in her very own garden in New York at her own farm. And according to her in her words, she had the most unbelievable garden that she has ever had. Talk about authentic and believable. That story is so compelling. We decided to make an entire campaign around it. And put it on the airwaves. Take a look at one of the spots. [Presentation]

That's a true story. Those pictures are literally her phone for her garden that we filmed to put that commercial on air. That commercial rate there, that 15-second spot is one of our highest scoring TV commercials in years here at Scotts. And not only did it, did a great job of launching our Miracle-Gro Organics product line this past spring. It's also helping to improve our brand perception on things like quality, trust and safety. So it's a fantastic campaign, one we're really excited about, and you're going to continue to see more of that campaign in the future. So I'll just close by saying everything we do in marketing advertisers is rooted in consumer insights. We have a consumer-first mentality, we invest behind these brands with big media and advertising campaigns. We feature big time celebrities and have breakthrough creative that drives our brands in this category and gets people up on the weekends and into the stores. So with that, I'm going to turn it over to Josh Meihls, who runs our sales team.

All right. Thanks, John. I get the awesome opportunity to represent the best damn sales team in the land here at Scotts Miracle-Gro, and we get to sell the best brands in lawn and garden, as John just went through. And I'll circle back to why I say we have the best damn sales team in the land here in a minute. But first, just a little background on myself here. I've been with Scotts for over 20 years. If you count part time, 23 years. I started as a merchandiser in the stores and really worked from the ground up. So when I talk about sales and having a number of roles, I've got a ton of passion and appreciation for what our team does overall. And I think Jim and Nate both hit on it, what makes our sales team different and this slide starts to show it here a little bit. We are end-to-end. We have deeply rooted partnerships with our retail partners across the board, a sheer force, an army on the ground, year round, over 300 full-time associates on the ground that work arm-in-arm with our retail partners every single day. And it's not just about execution. It truly is about partnership in the stores that our team has. Their relationships that go deeper than just the store itself. They help them achieve their goals. They help them with their livelihood. Heck, we have sales managers that are in the weddings of store managers, regional operators. They go to their events, their kids' birthdays. They have deeply, deeply rooted relationships. So when you say, how is this a competitive advantage? How is this a superpower, Others have tried to create field sales teams. They tried to put people on the street, they can't get in the doors. They literally say, "No, thank you. Scotts is here for me. They've been here every day. They have the relationships, we have the partnerships. And it's not just about those 300-plus full-time associates in season, we hire over 1,000 part-time associates, a lot of those returning year after year, growing their careers. It's a sales -- it's a talent pipeline for the entire company. So if you look at my leadership team, over half of them have come from the field sales team, they work their way up. There's no better way to know our consumer, how they interact with our products, our retail partners across the board. It truly is, really a stress relief for me, quite frankly. When I'm feeling stressed out in the office, what do I do? I go work in the stores with our field sales team because -- that's where it happens, and you get that feeling of reward every time you walk out of the store. It's not just about the home centers, Home Depot and Lowe's, where we provide that end-to-end service. It's also our independent hardware, as being the biggest retailer within that. We service them work hand-in-hand with those owners, give them suggestions not just on orders to get them ready for the season, but also how to merchandise, how to engage with consumers their marketing plans across the board to make sure we're giving them the service that they need. We've also expanded that team into Walmart this year and expanding that competitive advantage into that and of the retail. So we continue to learn where do we expand this advantage and that feeds up into what we call our business development teams. So we have teams on site in Atlanta, Charlotte, Bentonville with those teams that are fully integrated. It's not just sales, it's supply chain, it's finance, it's ops across the board to be a full-service vendor for our retail partners. So I don't like that word vendor either. We talk about all the time with our team, how do we become more than a vendor. And it's really working with our retail partners inside and outside the stores. And the last thing I'll mention when it comes to our field sales team is the impact they have on the community, right? You don't see it on the slide here. but they impact the communities as well. We work in positive ways, really volunteering working with local organizations and becoming more than a vendor every day in partnership with our retailers out there. And you look at it, how does it come to life in the results. So you look year-to-date through May, we were up 11% through June, up 10% in POS units overall. Awesome results, and we talked about three pillars coming into the season. Listings have played a big role in that, innovation that's fed it, through [ healthy ]. The new Miracle-Gro Organics raised beds have added a lot to the business. But promotions have played a key role in that, too, as retailers want to drive traffic. And when you talk about superpowers of our organization overall, where does it all come together? I look at that, there's no better example than the promotional strategies that we put together with our retailers. They leverage our brands. That's the power of our brands there. They leverage our supply chain. You look at some of these events, especially on what we call our growing media business with soil and mulch. We can drive in a 2-week period with a single retailer over 20 million units of POS, out the door. So when you talk about a superpower of what it takes to get that product into the store from a supply chain perspective, the collaboration with our local field sales team, that is working with them every day to open the doors, get the orders in the door, get it on the floor, get it signed and then the advertising that complements what our retailers do to drive the traffic into the store. That's truly where it comes all together. The other thing I'd mention is that, again, not just the home centers, we continue to diversify our business. We've seen growth in our home centers continue, but we've seen outpaced growth in other channels of trade, which includes online business, our farm and fleet business, club and hardware as well. And that's not by accident. That's through strategic partnerships and focus on that side of the business as well. When you look at where we're going, technology is an enabler for us to expand this competitive advantage. So when I think of technology, there's a lot of words on this slide. This is really pertinent to our field sales team and how we create a feedback loop overall that feeds into our brands, feeds into our BDTs, feeds into everything that we do on a real-time basis to make it smarter. It also makes our field sales team smarter on an everyday basis. But this is really about we have this awesome weapon with our field sales team, how do we aim it a little better? How do we make the impact more when we fire. So this is really what it's all about with the enabler of technology. Then you look at predictive analytics. This is again about making us smarter about everything that we do. I can't predict the weather better than anyone else in this room. And I don't think there's been a system created yet that can predict about weather on a day-to-day basis. But -- we look at other factors when it comes to more than just weather. We look at macroeconomic trends, we look at precipitation. We look at soil temperatures. We look at things beyond just as the sun out and what's the temperature today and is it raining or not? Right? There's other factors like money supply that play into this. So that bottom left graph is a little illustration of a new tool that our team continues to refine that helps us both in the long and short term, better predict the business. So in the long term, it can show us general trends by category. Where should we lean in, from inventory planning, partner with our retailers to say, this category, these regions are going to have a bigger lift this year. So we plan in a different way for those. In the short term, we can take the week prior, look at it and really break down what were the drivers that led to the results we saw. Was it promotion? Was it media? Was it temperature, was it consumer sentiment? And were there other things that were involved there and break that down and adjust in real time what we're going to do, right? We look at the week ahead and what I call anomaly spotting. So you look at a market that's going to be a 50-plus percent. Sound the alarms. We need to get inventory in there. We shipped resources. It's not just about the media that we shipped. We actually send SWAT teams with our field sales team as well. So we'll take a sales manager from Florida in the heat of the season send them up to New York. And get some extra hands up there when things are going to break and make sure we're ready for the season and vice versa throughout. So that's the tip of the iceberg where this can go in the future as we continue to refine it. It's really into our forecasting, planning and getting sharper there, having the right inventory at the right time across the board and impact our plans across the board in a bigger way. going forward. Last, I'll wrap up with, there's a lot of growth still to be had that the sales team continues to attack in partnership with the entire organization. in our core retailers, there's growth to be had, but there's a couple of areas where we know there's opportunity to expand. It starts with online and our retail partners, you can read any of their reports, their earnings releases, you can see how important the online business is to them, the investments that they're making. We're going to make sure we're in a leadership position, which we are right now to be their arm-in-arm with them to drive that retailer.com. And it's not about selling one bottle of Ortho. It's not about selling one bag of fertilizers, about selling the project. Getting those bundles, job lot quantities, the pro side of it that we're really starting to attack through retailer.com to create incremental opportunities through those areas of the channels. The other areas that we want to attack are new and expanding consumer bases or new retail outlets, so Hispanic consumers, attacking that with really a multipronged approach. One through our messaging, both at the store and through the media, but two, through getting into those regional channels. There's grocery chains out there that we're not in today that we need to be. We're working close with our partners to make that happen, making sure we're at every consumer touch point, where they want to shop and make sure our brands are represented there. And then outdoor living, as you think about outdoor lifestyle through fishing, hunting, different things out there that we want to make sure we're in all channels of retail, expanding, there. So we have teams assigned to that, a real force that we're going to drive behind into the future. So hope you take away here, the appreciation, the passion that this team has, the real competitive advantage that sales is going to continue to drive for Scotts Miracle-Gro as we go forward here. And I'm going to hand it off to our next superpower, which is Supply Chain and Kim Berry and Dave Huskisson. Thank you.

Good morning, everyone. Like Josh said, like John said, it is a privilege to spend some time with you this morning. My name is Kim Berry. I've been with Scotts for almost 15 years now. And I, along with my partner in crime here in supply chain, David Huskisson, we're going to spend a little bit of time today talking to you about the elements that are going into our 3 years strat plan from a supply chain lens. These elements are really driving a transformation is a word we common use, but it's not just a transformation of the process and technology. It's really embedded in an overarching initiative here in supply chain. We called WCCO. And what that stands for is world-class culture and operations. A lot of talk here about culture, a lot of talk here about grassroots movement and a lot of things that you will see in the supply chain elements for our 3-year strat plan are going to be presented this morning. So one of the things I'm going to begin with the end in mind, Nate mentioned it in his lead in, like, yes, the challenge has been accepted. We're going to really drive $150 million cost savings over the next 3 years with the strat plan. And really, the four components that are really going to drive that begin with the bottom there, what you see in the first building block, which is what we're calling our demand planning evolution. The really, the demand planning evolution really kind of triangulates three things. If you think about, it's the optimization equation. It balances inventory. It balances our service promise to the customer, and it balances all of our manufacturing capabilities and capacities here at Scotts. If you take a look at the sourcing and product design, that is nothing new here. It's just continuing. You saw all of the new opportunities that Josh presented in the new pipeline. You're going to see a lot of products today on the tour. This balances all of our product cost with the highest quality expectations and all of those expectations that we want to make sure the consumer has that's met. In our WCCO operational efficiencies, we talk about the 0 mindset, that is 0 tolerance for things in the safety space, 0 injuries, 0 quality defects. 0 waste, 0 losses. A lot of the culture, if you were to travel to any one of our facilities, they would really embed this in the conversation with you because it is about the culture that they're driving that performance in our operations. And lastly, David is going to spend a little bit of time talking about our network optimization in our warehouse automation. These are two very flagship elements that are going into our strategy. that are really driving cost out through our space, our footprint, our warehouses around the country and all of the productivity that we're gaining with new automation opportunities. So like we said, all of these are transforming both our cost and our cash flow position here at Scotts. And I think Nate mentioned it, too, in the beginning, two of these things that you're going to see today, we weren't even doing the same way 12 months ago. This is all completely evolutionary in our teams, and we're really working smarter, to use a lot of data and a lot of technology to make meaningful decisions. So let's go ahead and talk about demand planning, kind of step back a little bit and say, well, why would we be looking at demand planning why would it make the top 5 list in our strat plan. And really kind of the simple answer to that is one of the most important influencers to a more improved inventory position is strengthening your overall forecast. We need to first simplify, you heard Josh talk about the predictive analytics. Those are those external factors in our business that are really kind of out of our control. But we need to be so close to them. We need to understand them, and we need to be able to dynamically flex to adjust to them. Those all create opportunities for us, and we need to be on top of that. Within supply chain, though, there's two things. We need to understand the power and we need to understand the impact behind inventory at the right place, at the right volume and at the right time. When all of those things happen, we avoid things like inventory being stranded in a region where the demand really isn't there. We look at low -- we can have low inventory turns. We can have high cost of moving that inventory around the country. All those things we definitely want to avoid. So what if we were to really transform and use store level data. We know at every Home Depot store, we know all the materials that are going to be in that store. We know all the plans of what we want to sell through and the promotional activities and the point-of-sale activity. What if we were to build a forecast and we were to look at our two largest customers, which is what we piloted this year and look at building that forecast a little bit differently than the way that we've done before. And then how -- the second component is how can we precisely calculate then based on that forecast, how we're going to move inventory from production, really into our distribution network that's going to more effectively service from those distribution points. So one of the things I want to talk about is this is just a visual that kind of talks about that, that was then and this is now. So if we kind of very simply look at this visual on the left side, that was 12 months ago. For -- and this is really going to be reflective of things that we've done with Home Depot and with Lowe's and that we're going to really future scale as we talk about our 3-year road map here. If we look at the left, we have POS and we have all the materials by every customer at a national level. And we used to try to let the system based on historical averages, a little bit of insights do some algorithms for us to kind of say, okay, where should this inventory reside? Where is it going to be the most impactful. And what we found is that we -- all those things we want to avoid were actually happening. We had inventory that wasn't optimized in the right place. We didn't have the right amount in the right regions when we had dynamic issues that we needed to capitalize on really, what we did with Home Depot and Lowe's this year is really what you see on the right. We -- if you take a look at all those elements that are on the right, the store level stockings, all of our point of sale by store, all of the promotional activity that Josh talked about, all of those schedules of what we're going to actually load in and what we're going to actually execute in the season is now aggregated at every store level point and then rolled up into a forecast that now dynamically overrides our system and tells us where the inventory should go and where we should have it at what time, super power. We're taking technology. We're taking a lot of technology with the AWS with Python. These are -- these are super power systems that can crunch a lot of data and really take those millions of data fields now that we're trying to extract and build this from the bottoms up. into an overall summarize number that we're dynamically overriding our system and moving our inventory. So when we started this, we started this like 10 months ago. It was a pilot, like I said, with Home Depot and Lowe's. It was slow to start, it was very detailed. We told Nate, give us a few months here to get a crank of the wheel and kind of see what this tells us. And by December, the teams, my teams were really off to a great start. You're going to see some really good things in terms of what we wanted to measure. We wanted to look at -- we were challenged. We had to reduce our overall inventory levels. You heard Jim talk about it. You heard Nate talk about it. We were just at a too high of a position. We needed to understand really what influences our inventory turns, and we needed to understand how we can ultimately increase that forecast accuracy. If you think about every customer, every material, every month, every shipment plan, there's a lot of variables that go into making that forecast accuracy number high. And they got to be doing a lot of right things with the data to say, "hey, that's a really solid performance." And so the question there is, is it working? And so what I'll leave you with here is a slide around four metrics that we have been measuring. And every month, we've had success with these measurements. There hasn't been one month that we haven't seen significant gains on a year-over-year basis. Our overall forecast accuracy, if you talk about our forecast accuracy across the entire business, is up 11 percentage points. That is statistically significant when we talk about all those variables of every material and every customer, really solid performance. Our ending inventory here measures the total ending inventory. This is all of our raw [ wet ] pack. This is all of our finished goods. If you look at the significance of $781 million a year ago in May, and now we're down to $590 million as we close the month of May. Warehouse inventory moves. Talk about what we were mentioning a little bit in the first part about stranded inventory. We wanted inventory in the right place at the right time to avoid a lot of inventory moves around. We're very seasonal, right? So we have very specific production requirements, and we don't want to necessarily have to go back into production sometime so we will move inventory to capitalize on service. Those rebalances of that inventory is down 61%, which clearly tells you the inventory is going right into the distribution network the first time. And then lastly, all this comes to the bottom of the funnel with inventory turns. And when you look at all of our finished goods on a year-over-year basis, were up 28%. So when we're moving that needle significantly, we want this to not only be a significant improvement that we're going to continue to do. We also want this to be a sustainable component. We're going to make significant changes to our network. This has to be sustainable. And a lot of the pilot that we have 10 months of data on has shown us really, really good results. That we're going to begin to scale with other customers and other customers' data as we go into the next few years. super, super exciting. So with that, I'm going to leave you with this, like transitioning with David. He's going to talk about a lot of changes that are happening in our distribution network and what is to come in that space over the next year. David?

Appreciate it.

You've got it.

So I'm not one of the good looking ones that Jim referenced but I am a passionate one. So we'll go from there. So my name is David Huskisson, I lead our distribution group for the [ Lagor ] side of the business. So not the GM side. So soils and mulch, I will not be referencing, that's all on the lawns and gardens, Ortho and Roundup side. So network optimization. So Kim kind of alluded to it, right? We've had significant improvement in our inventory position overall. That is a key enabler to what I'm going to talk to you all about when it comes to our network. The other thing I'm going to end with is just some cool stuff, right? The fun stuff, the automation portion of that. So we'll have a few things to share there. So this first chart you're seeing is our evolution of our warehouse square footage, all right? So what you can see is in our peak got up to 7.5 million square feet. If you look at where we're going, all right? So at the end of FY '25, we're going to be at roughly 4.6 million square feet, all right? So to note, that is slightly below where we were in 2019. One call out on this too, as you expect, right, costs come down when your space comes down. So we're very excited. If you take out our e-commerce portion of this right? Our cost is going to be almost flat to where we were in 2019 for warehousing. Now what's impressive about that? I think everybody knows the inflationary pressures that we've seen on rent and labor. So to maintain almost flat is a huge accomplishment. The reason I call out that we have to pull out the direct-to-consumer e-commerce portion of that. In 2019, we had next to know direct-to-consumer shipments. This year, we're going to do over 6 million units. So significant growth that we've seen there in that business. So when you make these type of network adjustments that drive costs out, you also have to keep the customer in mind, right? So this chart on the left, Josh talked to a little bit earlier, this is where our key retailers are, the accounts that we're servicing. If you look at the chart on the right, ultimately, you see where our network is going to end up. It overlays very nicely with where our customers are. We're going to be able to service 91% of our customers within 2 days and 98% of our customers within 3 days. This is a marginal change from where it was overall. Now at one point in time, we had 18 shipment locations that we ship from to the customer. We're going to be around six this year, okay? Oftentimes, people say, well, when you cut warehouses, that means you're probably shipping it longer. It means the cost is going up in freight. If you net it out, so just this year alone, all right, if you net it out between warehousing and freight, we're going to save a little over $30 million in our supply chain. So a huge accomplishment there. All right. So up next, I'm going to show a video here, and this is a pretty exciting facility that we have. So this is our Central Ohio regional DC, okay? So last year, consolidated five warehouses in Ohio into this one facility that's 1.3 million square feet. In doing that, we cut down 230,000 miles of transportation that was happening here in Ohio. There's any science nerds out there, that is the distance from earth to the moon, okay? So put that one in the fun fact to take home with you today. Now where this video kind of ended, if you look up at the ceilings of it, what you'll notice is pretty high ceilings, yet you don't see any racking in there. Guess what? We're doing that right now as we speak. So over the next couple of months, we're doing a really significant investment in this facility. We're going to be racking 1/3 of that facility that's ultimately driving a 30% improvement in the density of that. Why is that important -- it's important because as we continue to consolidate the network in, right, we have to be able to have space to store that. So that's what's going to happen here. The other thing that I would call out is this facility is going to be an absolute powerhouse for us, okay? This facility is going to service about 35% to 40% of our total [ Lagor ] volume next year. So it's going to be a significant importance. All right. So we've talked about cutting costs by reducing the network. Obviously, we got to save on some labor too. So let's talk about the fun stuff. Let's talk about automation. All right. So this video that's playing here is something that we're looking to pilot here at the start of this upcoming fiscal year. Ultimately, what's cool about it is it's semi-autonomous, right? So 1 operator can operate five forklifts at one time. So obviously, you have labor savings that comes with that. But also we're going to be able to operate more 24/7 without being that labor-intensive in those off-shift hours. We're really excited about this. Hopefully, the pilot goes well, we anticipate that it will. We think that this is very scalable, okay? So we believe this is something that we're going to be able to do across our network, barring no issues arrived in that pilot. I mentioned the DTC growth a minute ago. So we're going to do over 6 million units in direct-to-consumer, and that's through our retailers' websites, and that's also through our website, right? So one of the things that we got to continue to do is drive cost out of that overall business, right? How do we continue to drive profitability in DTC. So this video that's playing here now is our stealth threat machine. It's a pretty cool name because it's a pretty cool project, okay? Ultimately, what it does is it reduces the amount of expensive corrugate that goes into a shipment, and it also helps reduce the amount of labor. The great thing about this, also very scalable. So similar to the forklifts that we just discussed, we're going to be expanding this. This is in our Chicago facility today. We're going to be putting this in our Memphis facility later next fiscal year. So really excited about that. Happy to say, too, our cost per unit on the DTC front, is the lowest that it's been in company history. So huge shout out there. All right. So in closing, kind of key takeaways here, right? We are ultimately very excited about the building blocks that we have. We feel very confident in these and we feel that these are going to be a backbone to where we need to go. There is one thing that you all need to take away today is we are extremely excited about our plans that are going to ultimately lead to $150 million of cost out over the next 3 years. So -- with that, I'm going to hand it off to Mr. Tom Crabtree. I know he's got some exciting stuff to talk about with Hawthorne.

All right. Good morning, everybody. As Jim mentioned earlier, I'm Tom Crabtree. I have the privilege of leading the Hawthorne Gardening Company. Let me start today is absolutely the perfect time for us to talk about our business at Hawthorne. We're actually completing one of the biggest transformations in our business as Jim alluded to earlier, let me just give you some perspective. I came over from the Scotts side 3 years ago to join Hawthorne. And I know Andrew, you know the industry really well. You think about where this thing was at 3 years ago, we were at the highest of highs. And even though I was on the Scotts side at the time, I could see what was going on, and it was like really cool. I mean they were kicking ass over there. It was exciting. We're doing great things on the Scotts side, but wow, this is cool, too. So I had the privilege to come over, lead the sales team 3 years ago, highest of highs -- and wouldn't you know, what happened to this industry 3 years ago, just the timing that I had come over. So I'm pretty sure, and this is just to give some perspective here, I'm the only Scotts sales leader in the room, probably the history with the company that has never been a prior year sales number in 3 years. It's amazing that Jim and Chris, let me stand up here and talk to you guys today. But in all seriousness, I say that because -- it's the swift, decisive action in the past 3 years that our team has taken that has me super excited about our opportunities with where we're going in this business, in this industry. Nobody made the changes Nobody stood up and did the kind of things, and I'm talking about our competition that we have done, and we are now better positioned, better set to succeed and drive this company into the future than anybody else out there. So while I came in at a really walking time in the business, it actually was the perfect time to come in and be faced with challenges that you're going to see over the next several slides have made our team faster, nimbler, I think, better thinkers, more creative and nobody is more poised to come back. As the industry may or may not give us a little bit as we go forward, but we're running the best Hawthorne business we ever have right now. So it's a really exciting transformative time as we go forward. So what do we do? First of all, we focused on our brands. On the left-hand side, we're blessed to have and have built this company with the best brands in the industry, some of which you guys probably know Gavita lighting, absolutely the premier LED lighting in the industry that's out there today, General Hydroponics, the best nutrition brand that's out there today. our soils led by Mother Earth, Botanicare, we've got the best brands to work with. So one of the first transformative changes we've made is let's move away from all of the me-too third-party distribution side of the business that we've been in that had a lot of fixed costs that went along with it, a lot of challenges that didn't allow us to be as nimble in times of crisis as we were able to. So as we've moved out of survival mode and into growth mode, it's a focus on what Jim and Chris build here, it is the best brands in the business, and it's our team's ability to get focused and get rallied behind those, but maybe more importantly, start to invest and put a little bit more back into those brands as we go forward. That's exactly what we're going to do, and you'll see that here in a few slides. The other one I want to call out and we talk about what we did -- you heard earlier, 1,300 employees, if you go back to my original start 3 years ago when we were on top of the world and kicking a**, 1,300 folks out there. Today, less than 300. And you could look at that and go, man, that's all you got left is less than 300 people. Here's the really cool thing. Like we got the best 275 people left in this industry today. We've got the people. We have a beautiful blend of the culture that's needed in this industry because it is a much different industry than the consumer side of the Scott's business, it's grassroots. It's people that get out back and have grows in secret places and backyards in that. We've got kind of culture, that kind of industry folks on our team. And then you got a lot of us, others who are sort of Scotts CPG, consumer business people. It's a beautiful blend that nobody else in our industry has got out there. So while we were at 1,300 folks at one time, we're at a wonderful mix of the right kind of leadership, the right kind of grassroot folks that we need in the business today. The other piece of what we did that I want to call out, you kind of look at, I guess, the [ 1:00 ] position of the slide. Distribution, as I mentioned, a lot of heavy fixed cost -- for years ago, we had 7,000 SKUs out there. Today, we're less than 1,000 because it's our stuff, it's the brands and the SKUs and the products and the solutions that we've put the innovation, the R&D research behind that you guys will get to see here in just a little bit. We've partnered up with people who are core on the distribution side. It's given us actually better service, better scale, better reach. So that long tail of customers in the hydro industry, 1,300 customers. And a lot of these folks, as you guys know, they're hydro shops. They are tough, in tough areas to service. They're tough locations, they're smaller. All of those kind of things, that tail of 1,300 customers was 1,000 long and we needed folks that have got the better tentacles to be able to get into there. So we partnered up on the distribution side, that's helped, again, to make us more nimbler as we go forward. And you talk about protecting what matters, what we're all here for today. R&D, research. We're the only company out there that's got the best blend of the brands that you need in this space, but the science, the real science that you're going to see today, to be able to innovate those solutions for growers who are more challenged today than they ever have been before. This industry is -- it's consolidated so much, flower prices down $1,000 a pound. They've got to get more efficient -- and how do they do that? How do they get more productive, they do that through the science and the research that we do here at Scotts that translates over to Hawthorne. We're going to do more of that as we go forward. So what does this start to look like? As we focus on our brands, the sales run rate that we see much more stable today. You say, well, why is that? Is that the end of -- we're focused on those 20 brands no longer focused on 100 or trying to be focused on 120 brands, we're focused on 20, the 20 that we know are the best, the 20 that we control, the 20 that we can put the promotions behind, the pricing programs, the marketing, the innovation behind -- that starts to give us more confidence in what our numbers can look like, not only tomorrow, but a month in the future as well. That's something I haven't been able to say for a long time, so much volatility within this industry. we're starting to see some stability. That's a really good thing for us. Signature brands are what we call again, those that we own, those that we're focused on, When I first joined this side of the business, that was about a 60-40 relationship because we were a broad distributor at that point in time. Today, it's 84%. I'm going to show you later on that's going to naturally evolve to 100% of what we do. Again, those are our higher-margin brands. They're the ones that we invest behind, all those things that you guys understand. The other one I want to call out is the consumable side of the business. We've got an opportunity here to continue to increase the recurring revenue stream, which is so important that the consumables side provides for us. If you listen to some of my competition calls in the past in that, they'd say, "Yes, Hawthorne heavily invested on the durable side of the business? And yes, CapEx. When things started to turn down, it crashed faster than anything." Because we have been strong and core on the Whiting side, it was an opportunity for them to say, " Yes, glad we're not those guys". You know what? We've got the best consumable brands as well again, Mother Earth, Botanicare, general hydroponics. The consumable side of our business was about 40%, 3 years ago. So it was a 40-60 relationship Already, we're above 50%, and I'll show you a little bit. As I start to think about our models for FY '25, the consumables side of the business goes up to 55%, maybe 60%. That's really good. But what I also want to make sure you guys remember is take nothing away from Gavita lighting that's out there right now. We're still the best lighting innovator, manufacturer and marketer out there, and we've got absolutely the best brand. So as the industry starts to give us a little bit back maybe some things happen on the regulatory, governmental side, that starts to put some investment dollars back in, we'll be there with CapEx lighting as well. Nobody else in the business, in the industry has got that really nice balance and capabilities of consumables as well as durables like we have. So again, it's been an interesting ride, really poised for profitability at this point in time. And as I said, while we haven't beat a sales number over the past 3 years, we just, for the completion of this quarter, we actually hit a profit target for the business. So it's been rocky. I think everybody understands that. It gives me confidence that the changes we're making in the business, the things that we're doing are driving the right behaviors, the right solutions and quite frankly, the right results for the organization. So let me shift now with where the business is going. So we've got some stability in it. Starting to get profitability back into the business, so where are we headed. We talk about having the best brands. That's what we've rallied around. We've got the best field sales force. So when you think about that 275 folks, we really protected the areas in the business that truly matter. Technical sales is a key resource for us. We're the only company out there in the business today that still got folks that can go into the grows, help growers continue to find ways to optimize, optimize their grows help them to reformulate, help them to problem solve. That's been something that we've worked hard to protect. It was something we built up that was important, quite frankly, before the downturn in the market. It's still important today, and it's going to continue to be a competitive advantage for us as we go forward. The other piece I want to talk about -- these brands, and I'll use Mother Earth is a key example, and you'll see it here in a few slides, our brands can work even harder for us beyond hydro. We love the hydro space, I love the culture, I love the industry -- but there's another consumer out there in the independent garden center channel that's looking for an edge -- earth year product, something they don't find the big boxes. Our brands can also work harder for us beyond Hawthorne, more growth opportunities coming. So where are we going to invest -- we're going to invest behind the key brands, the signature brands that have called out, don't take what I'm saying about our brands and take what growers are saying. And I think this is a great example, if you look at the kind of the upper right-hand side of the slide. We work closely from a social standpoint with all of our growers, trialing, testing, there's nothing more compelling in this industry than word of mouth, growers who are using your products, if they like your products, it goes like wildfire across the industry. One of the things I like about this particular call out is it talks about that unique combination of not just the product and price but quite frankly, a growing solution, a nutrients formulation from general hydroponics as well as Gavita lighting. That gets back to the science that we're putting into the business and how those come together, the technical resources, again, that we put into the field, into growers to help them find that optimal kind of tweaking because every grower out there, quite frankly, thinks their recipe is the best. And they're right, quite frankly. Theirs is the best. It's up to us to help to find that sweet spot for them, help them find that sweet spot. Just a key example, some of the marketing that we put out online, General Hydroponics, 25 million plants a year is what our volume supports. I think this is again where we are uniquely different than our competition and positioned to grow for the future. We're able to leverage. You saw John Sass, earlier today in his presentation showing all the things that they do on the Scotts side from the marketing perspective, we're able to leverage lean into some of those resources, some of those capabilities to drive high-class information in a social format here that leverages the media capabilities that we've got across the organization. Very different. We -- a lot of times at Hawthorne call Scotts our big brother, it's absolutely our big brother and a key competitive advantage that only we've got to be able to lean in to big brother, get that advice, get those resources. I mentioned it earlier when you talk about what are the advantages that are going to allow us to start to grow back, get out of the survive mode, really comes down to people, right? The technical resources that we put in the gross. We put people into the retail locations every single day of the week. They're doing things like supporting shows, merchandising, supporting promotions, helping to drive consumer engagement, trialing, testing, again, areas that we protected through the downturn, investments in people across the board, especially investments in what we know matters because we've seen it on the Scotts side, those people in the stores every single day of those people in the field, it's the heartbeat of what's going on in our industry. Nobody else has protected again that to the same degree that we have. Supply chain, again, another unique opportunity to us -- for us to capitalize on some of the capabilities and skill sets that come over from Scotts as well. Couple primary facilities, just a quick video on. So on the left, you've got our lighting facility. This is a lighting assembly facility in Temecula, California. We share this facility with Scotts, which is also a plastics durable spreader manufacturing facility. So it allows us to flex workforce and work kind of across the enterprise. You go up to Santa Rosa, California. We manufacture all of our nutrient products here. So the brands that I mentioned earlier, General Hydroponics, Botanicare, Cyco, Mother Earth nutrients, all coming out of this facility. As I mentioned earlier, our brands can work harder for us. We're going to extend them beyond hydro, opportunities with partners we're working with right now. As I said, there is a different consumer out there looking for something they won't find in the big boxes. It's an opportunity for us to bring them a solution that's, again, different, edgier and that's what we're working for right now. There's also the pro side, the greenhouse side as well. where our brands can win in addition to what they're doing on the hydro side. So we got the business stable. Looking ahead, we feel really confident. Near term, we're going to be able to drive single-digit percent growth. So finally getting from 3 years of not beating a prior year number to beating a prior year number is where we're headed at this point in time. Signature sales, our brands going to 100% at this point in time. And that nice mix of consumables moving up, recurring revenue, 55% of our sales is achievable as we look to FY '25 planning right now. So everything I've just mentioned, I won't belabor the point, survival mode. We've got stability. We're ready to grow baby. So with that, before I introduce Chris, I think the only thing I would add is we are in a great business. In use consumption continues to increase. There's been a ton of wackiness over the past 3 years in this business. That's okay. I think they've been great learning opportunities for us. They've been leadership opportunities for us. We've reinvented the business. Nobody is in the position that we're in right now to be able to bounce back and grow. And quite frankly, I am more excited today with where we are in the Hawthorne business than I ever have been. So thank you for the time. With that, I'll turn it over to Chris.

Thank you, Tom. I'm not going to really walk through a ton of content here. I'm going to just speak to you guys a little bit more from the hip. So first, I just want to thank Tom, who has the day-to-day at Hawthorne covered, I think, far better than I ever did, frankly. And the work that he's done over the past couple of years just dragging this business out of '22 and '23, just the depths that we were in to where it's at today is -- I -- I don't want to use the word heroic sort of inappropriately -- what we do, we sit in cubicles and offices all day and just make decisions. But the work that he's done has been, I think, in the business context, pretty heroic. And where we're at now is, look, it's a business that, as Tom said, it's rightsized for where the industry is. I think we've reset our assortment, both in terms of moving from a distributor model to a signature model, which is a lot more profitable for us, adjusting the types of products we make in that signature offering to fit with what our -- what our customers need, what cultivators are using as Tom referenced it is. When we started this business, you rightly saw a flower priced at $3,000, $4,000 a pound. Now good growers are lucky to get maybe $1,300, $1,400 a pound. So the input costs need to change dramatically and the businesses respond to that. So again, I'm not going to focus too much on sort of the tactical stuff and I'm going to speak a little bit more to the strategic. And look, I know based off of things that we've said, based off of just, I think, the logic in the assumptions and conversations I had this morning before we started. Look, I know you guys were expecting us at some point to talk to you about a strategic solution for Hawthorne. And again, we've told you to expect that. Now look, I'm not going to have that for you right now. And I think Matt talked a little bit about this last night with some of your folks. It's not for lack of looking. Jim, Matt, a lot of key people, Aimee and the whole team, we've done a huge amount of work looking for the right strategic solution, and we've kicked over every rock there is. And there's a number of nerd deals to do. So I don't want to act like there's nothing that we could do. But I don't think there's anything out there that we could do that would leave both the Hawthorne business, which is dear to me and our shareholders, of which my family is a single biggest in a better position. That's -- that's the reality of this. We've looked at every strategic avenue for this business to move it out of Scotts. And there are not better possibilities today than leaving in place and continuing to see the business improve. So again, I feel somewhat frustrated because I felt like there had to have been that right deal out there. We've looked at them. The deals that are out there are not good deals for us, not where we're at today, not better than leaving it internal, continuing to make progress. And this is where Look, you'll see progress. We'll talk about it next week. Matt will talk about it when we go through the financials. The business is getting back to a respectable place. We're not going to get a burden on -- on Scotts any longer. And that's the work that's taken to get from losing $40 million to not losing anything to making money. It's a long journey. I know it doesn't feel like a huge accomplishment, but it is for us. So we're going to -- we'll go through that stuff in the future over the next few minutes -- the next few weeks. Like I said, we're going to get back to making money. The multiple we'll see on those earnings within Scotts, it's going to mean that we're a respectable tenant of this house. We talked about Big Brothers. Look, I'm living in my father's house in a very literal sense here. But we're going to get back to chipping in our rent and buying groceries and doing those things. It's kind of the analogy we use internally. And we've really been kind of put to 2 mandates that we are going to abide by because they're completely nonnegotiable, which is we're not going to invest more in this business, and we're not going to lose money. And those are mandates we're meeting today and we're going to exceed those as we move forward. And you'll see moving into '25 at the real benefits of the work that Tom and the team have done to cut costs. Those are going to start to come home to us and roost over '25 into '26 when you'll start to see much more substantial profitability from this. And not profitability that's really dependent on market growth because we all know we just -- we shouldn't count on that. Do I expect some tailwinds based off regulatory catalysts that I assume a lot of you are aware of in terms of rescheduling and other things. I do expect that we can't count on it. So we're counting on pretty much flat growth, again, bringing profitability back into the business through that. But what I want to focus on more since we -- we've talked about Hawthorne, again, I don't have a strategic solution to provide to you guys right now because I don't think it's the right path for us today with the options we have in front of us. What I do want to talk about is on the other side of our cannabis strategies, our plant-touching investments, which is where we see the real opportunity here. So -- and just, again, one last one on Hawthorne, Tom talked out this a little bit. This is an industry that is -- it's bigger than the American beer industry. It's bigger than the dairy industry. It's bigger than the U.S. auto industry. And if we can't carve a respectable profitable business out of that gigantic pie, then shame on us, and I have every confidence that we can in spite of the last couple of years' experience. What I do want to focus on a little bit is on the plant-touching side of the business. And this is something I'll have to be somewhat careful here because I'm wearing my Scotts' lanyard and in my Hawthorne shirt and obviously, here on the campus talking to a bunch of analysts that cover Scotts. And maybe some of you cover plant-touching businesses, but I bet not many. So I want to be cautious because I'm going to be talking about multiple other independent public companies and private companies here. So I don't want to overextend myself. But when we look at the plant-touching opportunity, that's an investment we made back in '21 when everything was going gangbusters and this is back when we initially made the offer to Tom to join this exciting ascending team. And we looked around and said, "Man, we should continue to invest in cannabis because every dollar we spend there is just tremendous upside for the company." And we looked at the whole kind of constellation, the whole value chain in cannabis when we said, and I don't think it's a controversial statement to say, ultimately, consumer-facing cannabis brands are going to be the single biggest value creator in that value chain. And we felt with our experience and our relationships that we could invest wisely on that side. Look, I'm not going to get into the New York investment, it's timing. Look, we're in the state, did we pay a lot for it? We did, but we're there. So this is through our RIV business running in that background. So RIV has got about $70 million on its balance sheet, it has one of, I'll call it, functionally less than a dozen New York licenses right now to attack that, say, from an adult-use cannabis perspective. We recently announced about a month ago a merger with a company called Cansortium. So Cansortium is a -- it's a small multistate operator. They're in Florida. They're in Pennsylvania. They've also got operations small just because the states are in their infancy in Texas and Alabama. So we're excited about that business, the combination that we put together there. And look, that's -- it's a business that you got Florida about to kick hopefully to adult use the same with Pennsylvania, and we'll see how that goes. It's a 60% polling threshold to pass in November, which is a high threshold. The polling looks encouraging, and we've seen even here in our home state of Ohio, when the polling numbers have looked marginal that when the day came to the vote, it passed. And it's attached in Florida too in abortion vote, which I think will bring a lot more people out and hopefully should be positive for us. But we see Florida about to turn over adult-use, the same with Pennsylvania. New York is adult-use now but the market is in its infancy. So a ton of runway there, and that's before you get into states like Texas, which is a monster, and there are 3 licenses in Texas, one of which we own. Alabama, 5 licenses. Now you might not get excited about Alabama. If there's 5 licenses, hit a 5 million people. So again, we see optionality there, and it cost us effectively nothing to hold those licenses. When those states will turn on and be meaningful to us is anyone's guess, but it cost us tens of thousands of dollars a year to hold that, not hundreds or millions. So we're excited about the business that we've got, but much -- I mean, this is -- I think it's endemic to Scotts is we are in a perpetual state of evolution. So we're not just sitting on our hands there. And again, this is the tricky part that I don't want to get out over my skis too much on. We're not content with just the math that we've got, just a business that we've got. So we're looking at other deals on the cannabis side because we believe looking at some of the larger MSOs, almost all of them are customers of ours. And Tom didn't reference some of these particular deals, but we've got questions on our lighting business. That's a business that we're talking to major top 3 MSOs right now, selling 15,000, 20,000 light projects in one shot. So people are investing in the industry. And this is where -- again, I do feel that there is tailwind behind us. These are projects that we plan out over the course of the rest of the summer and into the fall. But people are spending money. The large MSOs are doing well, and they are valued respectively, but I don't think where they should be. If you look at their growth profiles, their opportunity and a lot of it because of [indiscernible] and banking restrictions and other things. But when we look at those top 5 MSOs, you look at people like whether it's Verano or GTI or Curaleaf, I don't think building what they have is so hard. And when we look at the opportunities we have with RIV and Cansortium, we're looking at a lot of things now. And again, that deal doesn't close until probably November of this year. This is just state regulatory approvals we have to wait on. But when it does, we want to have fully baked in the hopper a sequence of subsequent deals. And we're talking to people actively. We'll have people on site here a week from yesterday to have serious strategic conversations. And some of those deals would be large transformational deals like the RIV and Cansortium deal was that would bring in people with whether it's large maps, again, a lot of geographies, a lot of scale, a lot of revenue and earnings coming in. There's other deals that would bring us really strong brands because -- and again, this is something I do want to touch on briefly. I think MSOs, I think the industry writ large has completely misunderstood and undervalued brands in cannabis right now. You have a lot of states like Florida or Illinois, where you just -- you build stores, you build grows and you will celebrate like field the dream, just build it and they will come. And I think people misunderstand what that means. Because again, there's not something you can count on it. And that's when you have to zoom out and look at places like California, like Michigan, more mature cannabis markets, much more competitive where brands and differentiated process are winning today. So we're looking at deals again that fulfill different strategic pillars for us, whether it's scale in geographies and in earnings or it's brand power and differentiated cultivation expertise. So we're going to have those folks on site. And then there's other deals. There's much smaller, more tactical deals. I'd love to be in Ohio. Ohio is an exciting market for us. It's not just biased because we are based here. It's just -- it's a good profitable relatively limited market with a lot of people. So there's those smaller single-state deals that we could bolt into RIV and Cansortium. Just get bigger, take it more cautiously, but we -- again, we like to make bigger, more aggressive moves. So we're exploring all of that. And this is work -- and again, it's the sort of -- I wish I could put up on the screen, but I think it would be premature. With some of these moves that we can make, we believe that there's the opportunity to create a business that's worth -- again, there's -- I mean 2 deals I have in mind specifically that we are actively engaged on beyond RIV and Cansortium that we think could turn that business into a $1 billion-plus business just based on how peers are valued, then that's without attacking synergies, that's without applying specific expertise these partners would bring to states we already own. That's just out of the box, you put these businesses together, what is it worth. So we're really excited about it. And the bottom line is as much as I think people have looked at Hawthorne and said it's a distraction for the management team. It's -- it was an inventory had that didn't turn out well and you should move on. The way that I look at this is -- and I've been watching a lot of these, just indulge me on this digression here. A lot of these slight of hand car trick videos recently, so I've had poker in my mind. I'm not a poker player at all. But we got Delta hand that initially looked really great. And on that flop, it was we got a shady flop and it felt really bad. And that's kind of where we're at today. And we could fold our hand before those river cards come and we see what the hand actually is going to turn into. But I don't see any reason for that because again, you go back to those mandates, don't lose money, don't invest anymore. So we've taken our medicine, we've taken our write-downs. We are where we are, and we intend to play the handout because I believe with the whole cards we got that we're going to -- it's going to turn out pretty well. So we've got a lot to talk about. We've got a board meeting coming up here in a couple of weeks. We're going to run all of this past the board, and hopefully, they sign off on it too, I expect they will. But look, we're -- in spite of everything that we've been through. I think we're at a really exciting place. Again, Tom and the team have done heroic really hard work taking this business from where it was to where it is now, where it needs to be poised for profitability, poised for growth as the industry returns in whatever fashion it does on the plant touching side, that is -- it is all upside there. We've got good partners now. We've got more partners in the hopper, and I just -- I'm excited for you guys to see it because I hope it shows you guys a little bit of why we remain dedicated to the space. And with that, I'll hand it back to the team.

Ladies gentlemen, fellow dirt nerds, I am so happy to be in front of you guys today to talk a little bit about our vision for gardening. And what we're going to talk about today and what we're going to show you a little later is truly going to revolutionize the way we think about, the way we interact with and the way we cherish our gardens. We have a very simple but bold mission ahead of us, and that's really to empower gardeners of every skill level to create their own beautiful space that is sustainable and productive and brings joy to their home and their life. And so we don't think gardens are just plots of land. Like we really believe they are canvases for creation. We know they are sanctuaries of wellness. We know that they are essential to building communities and to protecting our earths' ecosystem. And we can't wait to start touting that message a little bit more with everyone. And lucky enough for us, we've got a great partner in our corner. And where is my clicker? And so we're going to continue to use Martha's expertise as a lifestyle expert, as a design, as an influencer and as a gardener, guru and dirt nerd herself. So this is our commercial. [Presentation]

And I have to say, this commercial has gotten more engagement than we've seen in a very, very long time. And people are stopping us on the street calling us dirt nerds. And we're super lucky today to have the dirt nerd herself with us. I'm going to bring out Martha Stewart. She is going to be our first ever Chief Gardening Officer. And so Martha and I are going to go on some wild adventures together, but what we really want to do is make gardens more accessible. We want to give more sustainable gardening practices to all of our fans. And we want to make sure that everyone engages in this amazing category. And so without further ado, Martha. I will turn it to you.

Well, I'm sorry, this is not Kim Kardashian style. If you've been seeing the Indian wedding with all the buzzoms and the diamonds, but this is my style. And it's been kind of a fun year working with Miracle-Gro and the people here because I am a dirt nerd. I have been gardening since I was 3-years old, and I know what good dirt is. My dad would take me fishing down in New Jersey Shore, we lived on a little street Elm place in Nutley, New Jersey, and we -- we actually went deep sea fishing on the party boats and caught Bluefish or mackerel depending on what was running and would bring them home and clean them right into the garden. So all the guts went right into the garden, all the scales, and we grew 4-pound tomatoes. And my dad said, it's all about the dirt. And so my whole life has been composting and reusing all the waste material from the horses in the -- I had some sheep once, but I don't have them now, donkeys, the chickens, the geese, the peacock, all of that goes into my compost. And then I found the new soil, the raise bit, organic soil here at Scotts. And I thought I'm going to have this tested, and I tested it. At NASA, I have a friend, Pablo [indiscernible], he's working at NASA right now. He is a doctor of soil and ecology, very had some Spanish guy. Did you ever meet him? He's very handsome, very tall. And we went to Iceland and New Finland with him, and he was really fun to travel with because he could tell you all the geology and everything. So he tested both soils and they were almost identical. So I knew I was on something that I didn't have to compost that other people didn't have to have chickens and horses and geese to get the same kind of compost, it was really amazingly. And I do a testing like that anyway, that's my independent kind of nature. And that it was really impeccably closed, I was so happy. So we got a giant load of the Miracle-Gro organic raised bed soil last year. I transformed a donkey paddock with raised beds. We -- strip the soil, you're going to see all of this in a story sometime. But we strip the turf off the beds. I measured it all out. There's 50 beds of varying lengths and widths and we then rolled up the sod, cultivated that soil with the troy built, then fertilize that with Scotts -- different Scotts fertilizers. Then we roll the turf back down upside down because I read that in English book that you should put it back and let it be in there. And so it composts itself. Then 10 inches in these 2 by 10 white oak boxes that we made on the perimeter of all these raised beds and fill them with the Scotts Miracle-Gro organic raised bed soil. And we plant everything all at once, and I must tell you, 50 beds of varying sizes, the largest bed is the pea bed, which is peas and squash, that's, I think, 55 feet long by 10 feet wide. Everything grew at once. We had dozens of 10-pound cauliflowers and 8-pound broccolies and so many -- in 4 weeks, we had so many artichokes, we couldn't eat them. From seedling plants, these are seedlings. And by the way, we used a lot of Bonnie's plants, too, which I was pretty happy about. I grow a lot of seedlings myself. But we use the Bonnie's plants, they were fabulous. And I've never had a vegetable garden like that. No one could believe what they saw. I even had our -- our boss-man and over here. Jim come to see and you were impressed, right? Yes, he was impressed.

Jim said, what did you do?" And she said, "You did it, Jim."

More than said -- because it's Martha, and Martha has got a scheme on how she run her place. [indiscernible].

So the dirt nerd commercial turned out to be very successful. And because of -- I have a very centric background in doing all these things. My magazine. It was one of the prize-winning magazines of all time lasted for 30 years before the media changed, and we're now doing online additions of the magazine, but also 6 special issues. We just did a gardening issue, which sold very well at -- is it $17.95 -- $17.95 for the gardening issue, where we used to sell them for $1.50, now they're $17.95 and they're doing extremely well anyway. So the authentic nature of my knowledge and people know that I know what I'm talking about, they're listening. And because of that, Scotts and I have gotten together and Jim and I are creating this new position called Chief Gardening Officer. I still have my other job and still doing all the other things I do. But I think being really pursuing my hobby, gardening is my hobby. Cooking and lifestyle and everything else was my job, but gardening is my hobby. Now -- and living on my farm. I live hour outside of New York, 150-acre farm in Bedford, New York and people are coming to see the garden. I have transformed so many of my friends into serious gardeners now when they see what's happening. And the big question is, what do you do with all this stuff? Because really, it's prolific and fabulous. And this year, the garden is even better than last year, even with this hideous weather we are experiencing, the garden has been -- It grew even faster, which is a little frightening because I don't -- I really -- it's too much heat. So I'm going plant fewer of everything and really spread it out, had to do successive plantings. I figured that one out. But the next batch of commercials after dirt nerd is, I told you so, and I'm going to hold up these things. Can we show that broccoli?

Yes.

So we're taking a lot of time lapse photography on single plants. So this is a broccoli growing in the raised bed -- and -- this is over a period of, I think, 3 weeks.

Yes. This is a 3-week period, and not edited whatsoever. Hopefully, we'll have some fun using...

We are going to get it more smooth when we do the final edit, but...

And in fact, the Broccoli got so greedy, it took over the camera.

But there, there is the broccoli, and that weighed in at about 7.5 pounds. And it is so tasty because I eat everything I grow. And I don't -- and I probably -- I don't go to the grocery store very much. I really do grow almost everything I eat. But unbelievably fabulous. So...

And I would say that kind of the best part about working with Martha, not only is kind of a provoking idea starter. But she tells us this real life examples, and they turn into commercial. I'll remind you again that broccoli commercial, which was our most engaging commercial ever was because Martha told us about her 12 pound... [Presentation]

So now you can tell people you saw that broccoli. I mean that is truly a real story that we're telling.

Yes. And I weigh everything that's picked, it comes in the kitchen, and I put it right on the digital scale and it is -- and we photograph it with the weight on it, so it's real. We're not faking it, nobody's hand is on it, like at the grocery store.

Well, Martha, what may we love about you're just -- you're super attuned to how dynamics are changing and what people care about. What do you see as kind of the most important things for the future of gardening?

Well, I deal with a lot of young homeowners in Bedford. I belong to the Garden Club, the Bedford Garden Club. It's the oldest garden club in America. And I also am an honoring member of the Garden Club of America. And what they're interested in, first of all, is sustainability. They're very interested in organic. They are very interested in diversity, biodiversity and they are especially interested in having their own gardens that are -- that work, and they don't want to waste time. They don't have time. They have kids. They have jobs. They don't want to spend time trying to grow stuff. I think you saw earlier the soil, those other beds of soil. When I saw those pictures, that tells the story. You use the wrong kind of soil, you're not going to get the right kind of results. And you think that you just dig up your backyard and it's going to be the perfect soil. When I bought my farm, the first thing I did, because I'm smart or at least I knew what to do. I dug up plugs of soil from all over the 150 acres and sent them to Cornell to the agriculture school there. And they tested it. It all came back really good. It had been a cattle farm. So I knew the soils. I was starting with good stuff. But with amendments and with the top dressing and the other things that we do, it is just phenomenal. So I think sustainability is very important. Also they want results. They really require results because they have to show flowers at their garden club meetings. They have to show their vegetables at the fair. They have to -- they want -- they want results and that -- and their kids want results too. So many children are getting into gardening. I'm just so pleased about it. I have a 13-year-old granddaughter. This beautiful girl who is mostly advancer and a student, but she has plants, so many plants and she grows them herself, and she comes and works in the garden and she's really interested in all of that.

And I mean speaking of future dirt nerds, I mean she's showing pictures of the root structure, like they understand the biology.

At 12 and 13, she's drawing biology.

Exactly.

Botany.

It's fascinating. We've got to capitalize that and make sure that they stay engaged and they understand all the aspects of gardening that bring so much joy.

And they also want ease of stuff. They want ease. So to create a raised bed garden you have to get the soil someplace. Why not get it from a very reputable source, and I can help them find that soil and they are finding it and they're buying it because obviously, I mean, I go and I circle around it. the big mass marketers up around Bedford, Mount Kisco and I see what's being sold and it's very impressive. So it's kind of fun to be working with people who are interested in the kinds of things I'm interested in. And I think that Miracle-Gro is really doing a good job in revisiting their mission, revisiting everything that they have done in the past and looking forward into the future. Gardening -- my first gardening book I wrote called Martha's Gardening was -- the motto was Pour L'avenir, which means for the future. And that's what we have to think about, the future. And we have to fix stuff really fast before it's too late. And this kind of soil helps fix. It really does.

Anything else you want to share with us? I know obviously, the personal usage, I love that story so much. Is there a part of your property that brings you the most joy?

I'll comment to see how both of you respond to this. Again, I called Martha, and we were working really hard about the marketing talent we had [indiscernible]. And I asked Martha's opinion. And she didn't just say, "I don't think you have the right people. She said, the right people are really, really hard to find." And she said, fortunately, Sadie's getting [indiscernible] and so she'd be the one that I would say. What do you like about Sadie? And how do you think you guys can work together, because this cheap gardening officer is no joke. This is like [indiscernible].