Good afternoon. I'm Brad Thomas, the Hard lines, Broad lines Analyst with KeyBanc Capital Markets. Thank you for joining us today for this fireside chat with Senior Leadership from Central Garden & Pet. We're very grateful to have 35 minutes with Brad Smith and Friederike Edelmann. Brad serves as Central CFO, a position he's had since September of 2024. And prior to this, he was CFO of the Pet segment going back to May of 2017. Also, with the company as a part of our conference is Friederike Edelmann, Vice President of Investor Relations and Corporate Sustainability, who has been with the company for the past five years. As a starting spot, Brad, with you having not too long ago taken over in the CFO seat and your predecessor as CFO, Niko Lahanas, took over as CEO. From our perspective, it seems like the company's key priorities have remained relatively unchanged, but anytime there's new leaders, there's always some element of change. Just curious about your perspective on how Central is being run differently today, if at all. No. Well, first of all, thanks for having me on today. It's always like the opportunity to talk about the business. I'd have to say a year into this role, a bit more than a year into the role, I have never been more optimistic about where the business is heading. And I think a lot of it has to do with the change in leadership with Niko. Niko's elevation to the CEO role has really increased the organizational pace and focus that I see across the company. I mean, we've really moved over the past year from a more centrally driven process-heavy model, which was really kind of in line or reflective of the leadership we had in the past, which was more kind of big CPG in background to a more business unit-led, more agile culture, which has really, I think, better fits the DNA of the company we have here, which has really been built by entrepreneurs. I would also say that the level of collaboration and trust between the businesses and corporate is at an all-time high, and that I'm really starting to see. I saw it start to pay dividends this past year, and I think we're just getting started. I mean, the opportunities that that level of collaboration and trust creates around unlocking greater benefits across the company, whether it's cost savings initiatives, whether it's opportunities around innovation and whatnot, I think we are heading to a situation going forward where we'll be far greater than the sum of our parts. So very excited about that. And then just excited about where the industry is heading. I mean, the long-term demographics continue to bode favorably for both pet and garden. And I think we're extremely well positioned versus our peers to capitalize on those opportunities. Great. And I look forward to digging into those categories a bit more. But maybe before we talk about the category outlooks, can you talk a little bit more about the market share opportunity and perhaps how you invest in product innovation, marketing, etc., to help drive market share gains? Yeah. So if we start by looking at the past year, we gained share in garden, and we held share in pet. And I would say that if we look at pet, it was really negatively impacted by the ongoing work we were doing to exit unprofitable categories or SKUs within categories. And then also on the e-com side, we really had some challenges in the back half, and particularly Q4 around pricing. And that was exacerbated when we needed to take pricing on tariffs. And that resulted in issues such as having to temporarily halt shipments with a larger customer. So that impacted our share performance in e-com, which is a big part of our business in pet. So I think looking at 2026, we've got a good shot at growing share in both segments, considering the additional product placements or distribution gains, as we call it, that we've got underway and planned for this year in both Garden and Pet. I think we've secured the bulk of our tariff pricing negotiations and are back to shipping and e-com. So we've kind of worked through the kinks in that important channel. And we should be finished with the bulk of our durables exit or unwind by mid next year. So I think that that is going to set us up well. I think most of really what's been driving share performance or share gains to date, and I think what will continue to help us going forward is really around the distribution gains we've been making across our customers. And innovation is one that is an area that we are continuing to focus on. We'll talk, I think, a bit more about this as we get into the conversation. It's not one that's been driving the share gains. I think it will eventually start to move the needle, but that's going to be a bit more down the road. And we are going to start to be investing more in that. Initially, what I think has helped us around innovation that we did see this past year and are seeing the benefits of this year would be around all the strength we've built up in digital marketing capabilities, both in driving conversion and as well as more upper funnel marketing, which is bringing new users into the category. We saw that play out recently with some work we did with one of our major brick-and-mortar customers to do a wild bird launch where the whole digital strategy that we brought to them along with the packaging and whatnot really moved the needle in terms of being able to drive additional sales and share. So that's an initial win from an innovation perspective, but we've got a lot more to come as we start building more muscle there. That's great. Maybe we can zoom into the two categories and kind of the industry outlooks next. So why don't we start with the pet segment? And I believe you've shared with us that roughly 90% of the business is dog and about 10% is cat. I think that's the number you shared with us most recently. But can you talk about the pet exposure that you have and some of the trends that you're seeing in end markets? And are we going to see a turn finally after this pandemic pull forward that we have? Yeah, so I would say you're speaking of new animal adoption and that trend in particular? Yeah. Just growth overall for the industry. Yeah. Yeah. I would say, I mean, cat continues to defy everybody's expectations and has been growing nonstop out of COVID. We expect that to continue given really demographics. I mean, cats are an easier pet to manage. They cost less money. They require less attention. They're fairly independent. There's many reasons why we expect that species ownership to continue to grow. In terms of a dog, a small animal and fish, I would say we're seeing increasing signs that demand is no longer declining and is stabilizing. I would say small dog is a bit more encouraging than large dog, and in fish and small animal, we are in our business where we breed and distribute fish and small animal like guinea pigs and whatnot. We saw in the last quarter for the first time in, I can't remember how long, a positive year-over-year comp. So I think based on what we're seeing in our own business and some of the data points that we're gathering, we're getting increasingly confident that we've hit a point where we're maybe not starting to rebound, but at least we're not dropping any further. The expectation that I have currently is that we will start to see a turnaround and a resumption of growth in dog, fish, and small animal at some point in this year. It could go into 2027. It certainly won't go beyond 2027. You usually don't see more than three or four years of a category being down before it finally has to trough. So we can share your view in that regard, Brad. Moving on to the garden segment, there's always the sort of two components of it, of the underlying industry trends and how is the weather. As we look out to next year, can you talk about the outlook for the garden category? Yeah, so I mean, we finished the year with the biggest POS ever. I think we talked about it on our analyst call, and that was despite choppy weather earlier in the season. We obviously had an extension in Q4, which was unusual, but I'll take it, and that really speaks to the strength of our positions in wild bird, grass seed, fertilizer, and packet seed, where we really saw strong year-over-year performance despite the challenging weather. It's always a wild card. Three past years have been suboptimal in the spring, so we've learned to plan for less than ideal conditions, and we rely on what we can control around assortment execution and inventory discipline. We're up meaningfully in total distribution points when you take out the third-party lines that we've transitioned direct to retailer in our distribution business. So that should support growth next year, those increases in distribution points. I would say also wild bird, that has been becoming an increasingly large part of our portfolio on the garden side. And it's nice because it does well when the weather is cold. So it's a nice counterbalance to the spring selling season for the rest of our business. So I think that if we get a more normal or favorable spring, that's certainly going to be upside versus what we've planned and what we built into our guide. If not, the portfolio and the cost structure, particularly when we factor in the work we've done to continue to further optimize our live plants business, it puts us in a place to better absorb any volatility that may come our way versus a few years ago. So I'm actually very optimistic about certainly our ability to meet or exceed our bottom line targets in garden, but also the opportunity to grow the top line. Brad, my impression on the garden side is that we're really coming off of three unfavorable years for weather in the spring to where, at a minimum, the comparison shouldn't be too tough. Fingers crossed, we actually get some good weather that we really haven't had since, I think, 2020, if memory serves. Exactly. I think just we've planned for the weather to be as bad as it was last year, and if it gets any better than that, to your point, it's upside. That's great. If I move on to the e-commerce channel, you all have had some nice strengths leaning into that. Can you talk a bit more about the importance of e-commerce and how you're leaning into that? Yeah. So it is a core part of how we go to market in pet. It's more than a quarter of our business, as you know, Brad. And garden, we just crossed over into double-digit penetration off of a smaller base. Obviously, garden has been later to the party, but it's catching up quickly. The ongoing shift in share of category from brick-and-mortar to online, it's going to continue on. Customers or consumers are increasingly doing their research and making purchase decisions online. We are well positioned to capitalize on that shift given the larger pure plays and omni retailers are among our largest customers. We're very focused this year on continuing to up our game in digital marketing. I mentioned the example earlier I gave around the wild bird launch we did with one of our large brick-and-mortar omni customers that really, I think the success to that has been driven by the improvements we've made in our digital marketing capabilities. And we're continuing to work further from nailing the basics around content management, optimize retail media spend, having the right price pack architecture in place for SKUs sold online, all the way over to effective upper funnel marketing, which we really didn't do a couple of years ago at all, better doing increasingly now to build brand awareness and generate interest leveraging social media and other tools. That upper funnel marketing is the lines are blurring as we see between upper and lower market, sorry, funnel marketing. And fortunately, with the use of AI and other technologies, upper funnel marketing is becoming a lot more cost-effective. And I mean, we're really seeing it as an opportunity to bring new users in the category. The last thing I would mention would be when we've talked about this with our Salt Lake City facility, our D2C network that we've built up initially on the East Coast and now in Salt Lake City for the West Coast is really going to increasingly help drive growth as customers move increasingly to direct-to-consumer. And that's, I think, also going to be. I think growth on online is also going to be supported in the future by our ability to increasingly manage third-party e-com. That's an increasingly large channel. We weren't playing in it a couple of years ago. We're increasingly playing in it now. And that's giving us the opportunity to sell more products online than we did in the past. And with every product we sell, determine what channel can be used to optimize the profits that we deliver from that SKU. Wonderful. I want to move on to the topic of acquisitions. It's really part of Central's DNA to do these tuck-in acquisitions. Can you help us think about what Central's framework is and what their process is as you look for future acquisitions? Yeah. So clearly, it is, to your point, been part of our algorithm in the past. It's a top priority for this year. We haven't done a deal. Just remind people that maybe not as familiar with the company. We haven't done a deal in the past couple of years. And we are sitting on almost $900 million in cash that we'd like to start deploying. I would say for sourcing deals, we've typically relied on banks for inbounds combined with our outreach efforts from our corporate dev team as well as our business unit leaders who are obviously knowing the players in their respective categories well and who may or may not be up for sale. We plan to step up our efforts by bringing in an additional full-time scout, which would be a former banker to do outreach full-time to companies that we find interesting that we may be interested in selling, but we're not aware of it, so we plan to augment there. Deal flow has been limited. Sellers of the companies that we do find interesting are generally sitting on the sidelines, but we do have some hope that that's going to start to turn around this year based on what we're hearing and we're starting to see. In terms of what we're focused on, it's really around high growth, high margin, fast-moving consumables with a moat. We want a strong management team, and of course, we need a cultural fit. We are focused mostly in pet, edibles, supplements, potentially pest control, and also on our professional business, which is tucked in our pet segment. And then within pet, cat is clearly our biggest white space opportunity. We under index there. As I mentioned earlier, it's clearly a species that has defied all trends and I think it's going to continue to go forward. So a huge opportunity for us there. Great. Continuing with some of the financial aspect of the business, cost and simplicity has been a big initiative of the company of late that's focused, of course, on productivity and efficiency and margins. And I guess for our audience, could you just talk about what is cost and simplicity and what inning are you in of that opportunity? So cost and simplicity is simply projects that we undertake within business units and on the corporate side of the business to take unnecessary cost or non-productive cost out of the business and to also improve cash flow. So it can take many shapes and forms. I would say it's still in early to mid-innings. I think we're kind of, what, three years into it now. Over the past few years, our efforts. It's been the single biggest driver of our margin expansion. And most of the savings thus far have been structural in nature. We've closed and consolidated, I think, 20 facilities roughly across the segments. And we've exited unprofitable businesses in distribution as well as in durables. I mean, when I look at three years ago when we started, it really wasn't a muscle that was well developed. Fast forward to now, it is, of course, strength of our company. It's really part of the DNA of each business now that we operate, so long-term, very confident that we'll continue to find more opportunities. I think great companies always find ways to take additional cost out of the business. If I look over the next couple of years, particularly the next 12-18 months, we've got a nice pipeline of opportunities that we're working on around further site consolidations and some other projects. I expect the results to be meaningful in 2026 enough to help us hold, if not modestly expand margin despite cost headwinds in 2026. It's not going to be to the magnitude of 2025, but it's going to still be meaningful. I think as we get beyond 2026, the opportunity will probably start to go down a bit each year. But that's really, I think, ultimately going to be dependent on how much M&A we do because ultimately M&A brings opportunities to unlock more savings. I want to follow up on that margin comment because the results that you've been posting of late have been extremely impressive, some of the best in company history. Obviously, there are elements of adjusting the portfolio and exiting unprofitable businesses that have helped. This is not just about pushing up margins in a particular category to record highs or raising price or things like that. But can you help us put into context how much more they could be just from your own initiatives and then what flow-through looks like when we actually start to get some sales in these industries? So I would say we're assuming for this year, we're cautious in our thoughts around top line. We have obviously got some headwinds that we're still working through around our distribution business on the garden side. We're going to be, as we've discussed publicly in year two, taking out of SKUs in our garden distribution business that are going to be sold directly to our customers by the supplier that we are working with. So that's going to be a headwind on the garden side through next year or this year, sorry. On the pet side, we've got the work that we're finishing around SKU rationalization that'll kind of take us through the first half of the year and then the exit of Interpet in the U.K. as well that will be lapping. So we've got those headwinds. We've got opportunities around distribution gains. And to your point, to your point earlier, if there's a chance of having not even a good garden season, but a decent garden season, we do see the possibility of some growth. But assuming flattish sales for the sake of this conversation, I would say we have enough around cost and simplicity to be able to allow us to sustain our existing margins or modestly expand margins. If I look at the improvements to date in cost and simplicity, because they are primarily structural, they are sticky. So they're not one-offs that will go away. And most of what we planned this year is of the same flavor. We've also secured most of our tariff pricing that we've got contemplated for 2026, as well as the pricing that we're taking on non-tariffed commodities, mostly on the garden side. So when you look at, if you assume flattish sales growth for 2026 and cost headwinds between tariffs and other non-tariff commodities, and you offset that with our cost and simplicity initiatives and the pricing we've got in place and the mixed improvements that we're seeing because we've cleaned up our portfolio, I think we're in a good spot in terms of our ability to potentially modestly expand margin. To the extent we start to gain additional growth top line, and that's certainly our plan and a key priority, then that should further expand margin because you start to get to improve factory utilization and whatnot. So that could significantly further improve margin top line growth. And so maybe saying it another way, Brad, it does seem like from where your margins are today, there's, again, still levers that you all can pull as well as an industry backdrop that arguably is at trough levels, not peak levels, and thus could be a tailwind for you. Yes. Yeah. It's one of the reasons we like the stock and think it's good. So maybe drilling into the tariffs a little bit more, I think you've quantified about $20 million headwind from tariffs over the next 12 months, I believe, is the number that you have shared. Yeah. But I wanted to just zoom out a little bit. And could you help us think about how far along we are in tariffs being put through and price increases and the inventory you have today and hitting the customer and just how all that is flowing through so far? Hitting the customer or the end consumer? I mean, both the retailer and then the end consumer. Yeah. Yeah. Yeah. Yeah. Just so we figure all that out. I mean, here it is. Yeah. Yeah. Yeah. We've been talking about tariffs, and yet it hasn't all flowed through yet for everyone. Indeed. Indeed. So I would say it's clearly been a headwind, especially in pet. I just remind people that it is a relatively modest share of our cost of goods and far lower than our pet peers. And a lot of that has to do with the fact that we've moved out a lot of the durables business that was being sourced from Asia. And we've further reduced our international exposure over the past few quarters. As you mentioned, roughly $20 million in incremental gross tariff exposure over this year. We are addressing it through all the stuff that we've talked about in the last two earnings calls around vendor cost concessions, sourcing shifts, portfolio rationalization. We just mentioned pricing. Customers, as I mentioned, we passed along most of that pricing, tough conversations, and a stop ship along the way. But we got it through. I would say that in terms of where tariffs are in our kind of inventory and what's being sold through the customer, I think substantially it's all baked in our existing inventory now. I think the current tariff rates are reflected in our inventory and reflected in what's being passed through to the customer. In terms of the end consumer, that's a trickier one. I don't have perfect data on that. I do feel, and this is my personal opinion, that in certain retailers, they started passing these through before we started passing them on those costs onto them. That's not uncommon in retail, but I do think that we probably kind of as a total group of customers, there's probably some additional tariff pricing increases that are coming. How has that gone as we think about your market share and shelf space, understanding it's more pet than garden where you have the exposure? Are you comfortable and pleased with your ability to retain or take share in the spectrum where you've had to take price? Yes. I mean, the reality is that our competition has taken price as well. So I can't think of any exceptions. So that is one aspect that's important to call out. I would say we do see customers or sorry, we do see consumers, particularly lower income, lower to mid-income that are making more trade-offs in what they buy, but they're not necessarily buying less from a volume perspective. I mean, most of our categories that we play in are kind of good, better. So we still offer good value for money on the branded side, and we're able to compete effectively with private label where needed. So we're able to, and we invest more where needed in order to retain the consumer. So we are seeing some movement around, but in terms of what consumers buy, we're continuing to hang on to what I would call total share of wallet. Great. I think we've got about five minutes left. I've got a few more questions that could squeeze in. Capital allocation. We talked about acquisitions earlier, but you all are sitting on a ton of cash and should generate a nice amount of cash. How do you weigh the opportunity for perhaps accelerating share purchases? That's a topic that Niko and I are discussing right now. It's clear that we'll continue to do buybacks, but at this point, I don't anticipate it accelerating. We do want to keep plenty of dry powder for M&A. And I mean, I have never spent more time than I've spent the last six months looking at potential deals and making calls and just, I mean, it is such a priority for us. So we'll continue to do buybacks. Can't say we will accelerate those, but I mean, we bought back more than $150 million this last year. So that was a good chunk. Could we end up doing the same amount this year? Possibly. But I don't see us buying back $300 million or anything like that. We really, really want to start to deploy some of that capital on M&A. Right. And of course, fingers crossed, it does feel like there are more sellers out there in the private company world these days than there were a year ago or two years ago. So hopefully that environment is looking more favorable for you here. Yeah. Well, with the couple of minutes we have left, I'll leave you with one more here, Brad. As we talk to investors, we feel like they often don't appreciate all the levers you all have to drive growth and drive margins and drive cash flow. But I'd be curious, as you spend time with investors, what do you think is most underappreciated about Central's opportunity going forward here? Yeah. I would say just the first point I would make is just the structural transformation of the company the past years from a we were a fairly complex, low-return portfolio. And given all the work that we've discussed on this call, I mean, we've really moved the needle to becoming a simpler, higher margin, higher cash-generating one with a modernized supply chain that's really positioning us well through D2C capabilities and whatnot to be able to really serve not only the present needs of the customer and consumer, but the needs that are going to be increasingly important in the future. So we're in a very different place. That's why we've got record EBIT and EBITDA. And if we wouldn't have bought back shares, we would have eclipsed $1 billion in cash this year. So I think it speaks for itself. Secondly, we've made these strategic investments quietly in the background. We haven't been talking about them as much as we probably should around, I know I did today, around e-commerce and D2C infrastructure, digital and data, our work to improve consumer insights and our focus on building muscle and innovation. This work is starting to show up in distribution wins. It started in the back half of last year. It's accelerating into this year. And so really encouraging brand momentum. Third, the strength of our relationships with customers who are their big customers, winning share in categories in pet and garden, those relationships have never been better. We talked about the Lowe's Vendor of the Year award that we got. Kaytee, our bird and small animal business, received a vendor award with Amazon, which they're very hard to get these awards. I mean, we are just well-positioned with customers that really are going to be the ones that are consolidating share in the years to come, and then lastly, our fortress balance sheet. I mean, we've got so much dry powder for M&A, and when you look at how we're positioned in terms of cash, in terms of low leverage, in terms of customer penetration versus our key competitors, I mean, I honestly think we're in a class of our own right now, so we stand to really consolidate share in the markets going forward, and I think it's a great stock to be in right now. We agree. Well, I really appreciate your time, Brad, and for everyone that joined us. Thank you and happy holidays. Happy holidays, Brad. Thanks.