The Scotts Miracle-Gro Q2 FY23 Revenue Declines 9% YoY, What About Adjusted EBITDA?

The Scotts Miracle-Gro Company SMG released results for its fiscal second quarter ended April 1, 2023, revealing company-wide sales decreased 9% to $1.53 billion. Hawthorne segment sales decreased 54% to $93 million, compared with $203 million during the same period a year ago, reflecting the continued challenges in the hydroponic industry.

Q2 2023 Financial Highlights

• Gross margin was $412.7 million or 26.9% of sales, compared to $588.4 million or 35.1% of sales in Q2 2022.

• Net income of $109.4 million, or $1.94 per diluted share, compared with prior year earnings of $276.5 million, or $4.94 per diluted share.

• Adjusted EBITDA of $404.8 million compared to $436.1 million in Q2 2022.

“The Hawthorne team has shown resilience through sustained industry challenges, and I commend them for overdelivering on our original Project Springboard targets and remaining focused on strategic execution,” stated Matt Garth, executive vice president and chief financial officer. “While we still expect daily sales rates to improve in the back half of the year, continued industry challenges make it difficult to provide topline guidance today. Instead, our full focus remains on cost control and getting back to run rate profitability by fiscal year-end. In recognition of the prevailing headwinds, we now expect a mid-single-digits percentage decline in total company operating income and a low single-digits percentage decline in adjusted EBITDA for the full year.”

Fiscal 2023 Outlook
The company’s current outlook for fiscal 2023 as compared to fiscal 2022 is as follows:

• Near 100 basis points decline in gross margin rate

• Mid-single-digits percentage decline in adjusted operating income

• Low single-digits percentage decline in adjusted EBITDA

• Interest expense increase of approximately $60 million

• Effective tax rate of 27 to 28 percent

• Free cash flow of $1 billion over the next two years

Photo by Giorgio Trovato on Unsplash

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