Welcome to Spectrum Brands Holdings Q1 2026 Earnings Conference Call and webcast. We are pleased that our first quarter net sales and adjusted EBITDA exceeded expectations, despite continued headwinds. These external realities are disproportionately impacting our Home and Personal Care business, where overall global consumer demand continues to be subdued. While these categories were modestly down for the quarter, our brands actually outpaced the category and delivered growth versus the prior year.
Our strong financial position affords us meaningful flexibility to capitalize on market opportunities, while continuing to invest in our businesses and return capital to our shareholders. I'm proud of the progress we've made in optimizing our working capital and exercising diligence in our spending, which has strengthened our financial position. This was partially offset by our Global Pet Care business returning to growth, with our key companion animal brands outperforming the market while also benefiting from a softer prior year comparison. Adjusted EBITDA for the quarter was $62.6 million, a decrease of $15.2 million, driven by lower volume and reduced gross margins.
Adjusted diluted EPS increased to $1.40, driven by a one-time tax benefit and the reduction in share outstanding, partially offset by lower adjusted EBITDA. Capital expenditure were $8.1 million in the quarter, $2.2 million higher than last year. Cash payments towards the structuring transactions, strategic transactions, restructuring-related projects, and other unusual non-recurring adjustments were $4.8 million, versus $8.8 million last year. Moving to the balance sheet, we had a quarter-end cash balance of $126.6 million, and $492.2 million available on our $500 million cash flow revolver.
| Metric | Period | Current guidance |
|---|---|---|
| Net sales | Full-year fiscal 2026 | Reiterated: flat to low single-digit growth |
| Adjusted EBITDA | Full-year fiscal 2026 | Reiterated: low single-digit growth |
| Adjusted free cash flow conversion | Full-year fiscal 2026 | Reiterated: approximately 50% conversion |
| Home & Garden net sales | Q2 fiscal 2026 | Expected flat to slightly up year-over-year, with a big back half |
| Metric | YoY | Note |
|---|---|---|
| Net sales | -3.3% (organic -6%) | Continued category demand softness in Home & Personal Care and a prior-year accelerated seasonal inventory build by Home & Garden customers, partially offset by Global Pet Care returning to growth; $18.5 million favorable FX. |
| Adjusted EBITDA | -$15.2 million (to $62.6 million) | Lower volume and reduced gross margins. |
| Gross margin | -110 bps (to 35.7%) | Lower volume, higher trade spend and higher tariff cost, partially offset by pricing, cost improvement actions, operational efficiencies and favorable FX. |
| Operating income | -$17.6 million (to $27.1 million) | Decline in gross profit. |
| Adjusted diluted EPS | Increased to $1.40 | A one-time tax benefit and reduced shares outstanding, partially offset by lower adjusted EBITDA. |
| Global Pet Care reported net sales | +8.3% (organic +5.8%) | Companion animal up high single digits and aquatics up low double digits, aided by a softer prior-year comparison and a prior-year strategic order shift of ~$10 million ahead of S/4HANA implementation. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariff and macro recovery | Worst of tariff and economic disruptions believed to be behind the company | Reaffirmed; businesses healing as supply chains restored and pricing taken, with early signs of recovery in consumables while durables lag | — |
| HPC appliance strategic solution | Committed to finding a strategic solution as headwinds dissipate | Still committed; ran a process derailed by trade policy, expects improved profitability in fiscal 2026 to drive industry consolidation with Spectrum as the strategic merger partner of choice | — |
| Fewer, bigger, better strategy | Concentrate resources on higher-impact initiatives | Continuing; data-driven approach yielding share gains, with innovation pipeline connecting with consumers | — |
| Corporate cost / TSA headwind | Highlighted in prior quarter's call | $20 million TSA income headwind from the ASSA ABLOY HHI exit, roughly half to be covered this year; some costs pushed out of Q1 due to timing of S/4 go-lives | — |
| S/4HANA ERP rollout | Implemented in North America Global Pet Care and Home & Garden | Preparation underway for appliance business and remaining international regions | — |