Spectrum Brands Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q2 2026 Spectrum Brands Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jen Schultz, Division Vice President of FP&A and Investor Relations. Please go ahead.

Thank you, and welcome to Spectrum Brands Holdings Q2 2026 Earnings Conference Call and Webcast. I'm Jen Schultz, Division Vice President of FP&A and Investor Relations. and I will moderate today's call. To help you follow our comments, we have placed a slide presentation on the event calendar page in the investor relations section of our website at www.spectrumbrands.com. This document will remain there following our call. Starting with slide two of the presentation, our call will be led by David Mora, our Chairman and Chief Executive Officer, and Fessel Cutter, our Chief Financial Officer. After opening remarks, we will conduct the Q&A. Turning to slides three and four, our comments today include forward-looking statements, which are based upon management's current expectations, projections, and assumptions, and are by nature uncertain. Actual results may differ materially. Due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated May 7, our most recent SEC filings, and Spectrum Brands Holdings most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statements. Also, please note that we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today's press release and slide presentation. which are both available on our website in the investor relations section. Now I'll turn the call over to David Mora. David.

Hey, thanks, Jen. Good morning, everybody. We want to welcome you here to our second quarter earnings update. We thank you and appreciate you joining us this morning. I'll kick the call off today with an update of the operating environment that we find ourselves in. I'll tell you about our operating performance, and then we'll hit our strategic initiatives. Fessel will then provide a more detailed financial and operational update, including a discussion on the specific business unit results. If I could have everybody turn their attention to slide six, I think, on the investor deck. Let me start today's call by saying that I'm pleased to be here reporting another strong quarter for Spectrum Brands. Once again, our quarterly results outperformed expectations, both on the top and bottom lines. This is a direct testament to the effectiveness of our strategy and, frankly, the dedication of our team. It's quite gratifying for me to see our disciplined approach and focused execution translating into our financial results in such a meaningful way. I am pleased to also report that in the second quarter, both of our reported net sales and adjusted EBITDA increased year over year, with net sales increasing 4.9%, and adjusted EBITDA growing by an impressive 17.8%. This is a significant milestone for our company, as it marks our return to growth for the first time since the first quarter of 2025, prior to the trade policy changes and the overall deterioration in global macroeconomic conditions. We continue to see signs of stabilization within the broader markets that we serve, with a generally resilient consumer despite the dynamic environment, except for some expected consumer demand softness in our home and personal care business. As we look ahead to the balance of the year, we're quite pleased with the overall improving conditions. However, we're also cautious about the resilience of the consumer, and we will remain vigilant as we run the business going forward, given recent geopolitical tensions, most notably with the recent conflict in the Middle East increasing global fuel prices, and the potential for more volatility that we expect in U.S. trade policy this summer. On the cost side, we're also mindful of the ongoing challenges in volatility created by the broader macroeconomic landscape. Since our last quarterly update, geopolitical tensions have escalated, and this has resulted in some modest inflationary cost pressures, particularly across some of our commodities and our freight spend. At this time, we do not view this as significant headwind for the balance of this year, and we would expect to largely offset it with recent changes to U.S. trade policy. We will continue to monitor all these developments closely, as we have demonstrated in the past, and we will proactively address cost pressures as they arise to ensure our overall profitability. If I could turn your attention back to the second quarter, We made focused investments in our key businesses, and we returned to growth, all the while maintaining a strong balance sheet position. We continue to exercise discipline by optimizing working capital and keeping our net leverage low, while also returning capital to our shareholders. We ended the quarter with approximately $125 million in cash, less than $30 million drawn on our revolver, and our net leverage ratio stood at 1.66 turns, well below the long-term target we've set for the company of 2 to 2.5 turns. We did repurchase about 100,000 shares in the quarter for about $6.8 million. Since the close of the HHI transaction, we've returned over $1.4 billion of capital to our shareholders through our various share repurchase programs, and we've actually repurchased almost 45% of the entire share count of the company since the closing of that transaction. We additionally have over $300 million remaining of board authorized share repurchase programs left. We will, however, be judicious going forward on share repurchases to ensure flexibility as we look to capitalize on market opportunities. We'll talk more about that later. On the strategic front, as we disclosed in our recent AK filing Monday of this week, we've entered into an agreement with Oak Tree Capital Management to form a strategic partnership in our HPC business. My relationship with Oak Tree spans over 20 years, and I'm excited to be partnering with a firm with a proven track record of taking businesses similar to HPC and optimizing them for standalone success. Under the terms of the agreement, Oak Tree will make a $127 million investment in the HPC business, consisting of $67 million of preferred equity and the balance in the form of a term loan. Their investment implies a valuation for the HPC business of approximately six times LTM EBITDA, as of Q1 fiscal 26, and importantly, it is non-recourse to Spectrum Brands holdings. This transaction represents a meaningful step forward in Spectrum Brands and our previously communicated strategy to separate HPC from our other business units. For the HPC business, this investment actually accomplishes several goals. It reaffirms our vision for the future of the business through this investment from a sophisticated counterparty, It establishes a separate dedicated platform for HPC to maximize focus and growth potential. And three, it creates optionality for HPC to become the strategic partner of choice for the industry. That's whether through a sale, M&A, or spinoff. We are excited about our partnership with Oatree, and we now have a well-capitalized standalone vehicle to maximize shareholder value. If we can turn now to slide seven, I'd like to update you on our strategic priorities for fiscal 26. These priorities continue to serve as a guide in our decision making, and I'd like to share our progress on each of them individually. First, if we can start with financial stewardship, I'd like to build upon what I shared earlier in regards to balance sheet health. A big part of that health is centered around disciplined inventory management, which has been a focus of ours for the last couple of years. We now have a best-in-class S&OP process, and it's yielding results and ensuring that we have the right level and mix of inventory on hand. This isn't just my opinion. Exhibit A, we ended second quarter with inventory actually $50 million lower than the prior year, and we still delivered fill rates well above 95% across all businesses. We're demonstrating disciplined inventory execution without compromising service levels. This is an excellent demonstration of efficiency, and I'm extremely proud of the team for their continued diligence in driving working capital efficiencies while constantly and consistently meeting customer demand. Second, if I can move to operational excellence, we continue to make steady progress on our S4 HANA transformation, which remains a foundational element of the long-term strategy here. We recently implemented S4 on our global pet care EMEA business, marking the first major international deployment of our new ERP transformation. With this milestone, over 95% of our combined global PEC cure and home and garden businesses are now operating on a unified ERP platform. While learnings from this deployment are informing how we operate today, our primary focus is on completing the remaining implementations, most notably within the HBC business. to further standardize processes, strengthen controls, and support scalable growth over time. As we continue to advance this project, the platform is expected to further enhance productivity, support better and faster decision making, and reinforce our ability to scale the businesses over the long term. We also remain committed to our fewer, bigger, better strategy for our brand investments. This is enabling us to focus resources on higher impact initiatives while maximizing returns. This disciplined approach has driven share gains in several key categories and has strengthened our engagement with consumers. Later in the call, Fessel will share more details on our innovation pipeline and how it's fueling our growth across the portfolio. This now brings me to our third key priority, which is investing in our people. I often tell the team that winning is simply more fun, and I think it's a philosophy the team is starting to really embrace. Achieving our goals and delivering results consistently creates a positive and energizing environment where everyone feels valued and motivated. Success not only boosts morale, but it fosters a culture of collaboration, innovation, and continuous improvement. Over the past year, our company has faced significant challenges, and we've had to make some really tough decisions. Yet our team's resilience has been remarkable. We are committed to providing the resources, training, and support that our employees need to thrive, because we know that when our team is winning, our business and our stakeholders win as well. Lastly, the fourth priority for fiscal 26 is centered around our strategic transformations. We are encouraged by the strong results in both our global pet care and our home and garden businesses, with our key brands in both businesses delivering above market sales growth. Our team's focus on consumers' needs, supported by our data-driven strategy, continues to generate positive results. Beyond organic growth, we continue to remain optimistic about M&A opportunities in both segments. We are committed to a disciplined process in evaluating acquisition targets and believe we are well positioned to be the consolidator of choice in both pet and the home and garden categories. Moving to home and personal care. While Oak Tree's strategic investment in the business represents a significant milestone in our journey toward becoming a pure play pet and home and garden business, it's important to note that our near-term objectives for our home and personal care business remain unchanged. We will continue to be good stewards of the appliance business, maintaining our focus on operational excellence and maximizing profitability. As we move forward through this transition, our team will continue to execute with discipline, ensuring that the business remains strong and is well positioned to capitalize on market opportunities. We can now have everyone turn to slide eight. I'll cover our high-level fiscal 26 earnings framework. We remain quite pleased with our performance in both global pet care and home and garden, and we are on track to deliver top-line growth for the year in each of these businesses. And in home and personal care, despite the decline in net sales, top-line performance remains in line with our expectations for the segment. As anticipated, recovery in durable product categories is taking longer and reflecting ongoing softness in global consumer demand. Importantly, our strong results in the first half of the year provide us with increased confidence and help de-risk our outlook for the back half of the year. And this positions us well to navigate any potential headwinds. While we continue to expect net sales to be flattish to up low single digits versus the prior year, we are in fact raising our outlook for adjusted EBITDA, and we now expect adjusted EBITDA to increase by low to mid single digits. We continue to expect adjusted free cash flow to be approximately 50% of that adjusted EBITDA. Before I turn the call over to Fessel, I want to acknowledge the outstanding contributions of our colleagues worldwide. I want to thank them for their relentless focus and their determination. Those have been key to achieving our strategic objectives, and they've positioned us well for continued success. Now you'll hear more from Fessel on the financials and some additional business unit insights. and I'll pick you up in the Q&A to finish the call with you. I'll turn the call now to you, Faisal. Thank you.