Central Garden & Pet Company

Ladies and gentlemen, thank you for standing by. Welcome to Central's fourth quarter fiscal 2024 earnings call. My name is Julian, and I will be your conference operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If anyone should need assistance during the call, please press star followed by zero on your touchtone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Frederic Edelman, Vice President, Investor Relations. Please go ahead.

Thank you, Julian, and a warm welcome, everybody, to Central's fourth quarter and fiscal year 2024 earnings call. Speaking today are Nicola Hannes, Central's new Chief Executive Officer, Brad Smith, our new Chief Financial Officer, John Hansen, President, Pet Consumer Products, and J.D. Walker, President, Garden Consumer Products. In just a moment, Nico will provide our key takeaways from the fiscal year, share more about our cost and simplicity program and our outlook. And Brad will then discuss the financial results for the year and for the quarter, our two segments and our outlook in more detail. John and JB will then join us for your questions. Before they begin, I would like to remind you that our forward-looking statements made during this call are subject to risk and uncertainties. that could cause our actual results to differ materially from what we share today. We've described the range of risk factors in our annual report filed with the SEC. Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events, or otherwise. Our press release and related materials are available at ir.central.com and include the gap reconciliation for the non-gap measures discussed on this call. Lastly, all growth comparisons made during this call are against the same period in the prior year unless otherwise stated. If you have more questions after the call, please don't hesitate to reach out to me. And with that, I'm handing it over to Nico.

Good afternoon, and thank you all for joining us today. I'm truly honored to be here, Central's CEO, leading our talented team as we advance the company and enter an exciting phase of growth. Since becoming CEO, I've had the privilege of working closely with our leaders and our board of directors, and I'm more confident than ever in our path forward. We are operating from a foundation of strength with a focus on our central to home strategy, which includes our cost and simplicity initiatives and our plans around customer and consumer experience, innovation, and operational excellence. Our goal is to build on this foundation and to drive long-term value for you, our investors. Having been with Central for over 18 years, I bring deep experience and understanding of our business. However, stepping into the CEO role offers me a fresh perspective, and I see clear opportunities to sharpen our focus, accelerate our key initiatives, and identify areas for future growth. Going forward, I'm eager to share our vision and provide you with insights into our performance and discuss the steps we're taking to navigate the current environment while setting the stage for future success. Before we go into the key messages, I want to thank Beth Springer, who did an exceptional job as our interim CEO and continues to serve as our lead independent director. Let me start with the three key themes I'd like you to take away from this call. First, we had notable achievements in fiscal 24, despite challenges. We delivered solid results in a tough environment. We've made meaningful progress on our cost and simplicity program. We're streamlining our operations and positioning ourselves for long-term success. And third, looking ahead to fiscal 25. While we expect the consumer and competitive landscape to remain difficult, we're focused on executing our strategy and driving sustainable growth. Now let me delve into each of these themes in more detail. Turning first to our fiscal 24 achievements. We're incredibly proud of what Team Central accomplished over the past 12 months. Despite facing a difficult environment, including soft demand across our pet businesses, particularly durable pet products, and a tough garden season, we delivered the following. Growth in non-GAAP EPS, continued gross margin expansion, strong profits in our pet segment, and another record year of operating cash flow. These achievements showcase the grit and perseverance of our 6,450 employees who rolled up their sleeves and worked together to drive results and serve our customers. Thank you to the entire central team for your dedication and resilience. Second, progress on our cost and simplicity program. Our cost and simplicity program is a multi-year journey to simplify operations, enhance efficiency, and better leverage the scale of our business across procurement, manufacturing, logistics, portfolio optimization, and administrative costs. Let me highlight some of the initiatives from the fourth quarter. Starting first with our consolidation of operations, we further integrated our Arden outdoor cushion, dog bed, and K&H businesses, closing two leased facilities in Arizona and California, and shifting production to our own facilities in North Carolina and Indiana has improved e-commerce capabilities, reduced shipping costs, and provided room for growth. Second, scaling our natural dog treats production. To meet growing consumer demand, we expanded capacity and enhanced efficiency at our natural dog treats processing plant in Mexico, allowing us to capture a larger market share. Third, optimizing transportation. We completed the rollout of a corporate transportation management system and centralized load planning across most business units, reducing costs and improving delivery reliability. And finally, streamlining our live plants operations. We consolidated our two live plants businesses under the Bell brand name, closed older, less profitable facilities, and moved production to a modernized site in Kentucky for better planning and output. These initiatives are part of our broader effort to make Central more lean, more agile and efficient. They are designed to drive margin expansion and free up resources for organic growth and strategic M&A, as well as to enhance our social responsibility and environmental stewardship. As such, we are embedding sustainability into our operations with measurable goals outlined in our latest impact report to ensure a resilient and secure supply chain, reduce our environmental impact, and provide a safe working environment for our employees. Recent efforts also include participation in Lowe's Foundation and Home Depot's Foundation community events, reflecting our commitment to giving back to those in need. Now let's move to our third key message around our outlook for fiscal 25. Looking ahead, we remain steadfast in our commitment to the central to home strategy. Here's how we're preparing for the year ahead. staying disciplined on our cost and cash agenda, making targeted investments in critical capabilities, particularly in e-commerce, digital, and innovation, maintaining a focused approach to identifying and pursuing strategic M&A opportunities that align with our growth priorities, enhance our capabilities, and strengthen our portfolio, and advancing a pipeline of new products across our pet and garden portfolios with launches planned for fiscal 25 and beyond. That said, we anticipate having to navigate a challenging external environment marked by macroeconomic and geopolitical uncertainties. We foresee continued pressure on consumers who will prioritize value and be strongly influenced by discounts and promotional offers. An increasingly competitive and promotion-driven marketplace and significant headwinds in the brick and mortar retail sector presenting unique challenges. Furthermore, extreme weather seems to have become the new normal, adding an even greater volatility to an already seasonal garden business. That said, we remain confident in our strategy, our team, and the decisive actions we are taking to drive profitable growth in fiscal 2025 and beyond. In line with this, we are guiding fiscal 25 to non-GAAP EPS to be $2.20 or higher. With that, let me briefly summarize my remarks before turning it over to Brad. I'm incredibly proud of what we accomplished in a challenging year. We delivered growth in non-GAAP EPS, demonstrating our financial resilience. We successfully expanded our gross margin despite softer category consumption and sales. and we achieved a record-breaking cash flow year, solidifying our fortress balance sheet. But what excites me most was that these achievements were driven by our exceptional people and their unwavering ability to execute, even in a continually changing and tough environment. And with that, I'd like to introduce to you Brad Smith, Central's new CFO. For those of you who haven't met Brad yet, he joined Central in 2017 as Chief Financial Officer of our pet segment. Prior to Central, Brad worked 12 years at what is now Ahold Del A's. Brad, the floor is yours.