Good day, and thank you for standing by. Welcome to the Scotts Miracle-Gro Q1 Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Aimee DeLuca, Senior Vice President of Investor Relations. Please go ahead. Thank you. Good morning. I'm Aimee DeLuca. I'd like to welcome you to the Scotts Miracle-Gro Q1 earnings call. I've recently stepped in to lead investor relations after 21 years at Scotts in other finance and strategy roles. It's been a pleasure meeting many of you already. I look forward to meeting many more of you over the coming months. Joining me this morning are our Chairman and CEO, Jim Hagedorn, our new CFO, Matt Garth, as well as Mike Lukemire, our President and Chief Operating Officer, and Chris Hagedorn, Division President of Hawthorne. In a moment, we will share some brief prepared remarks from Jim and Matt. Afterwards, we'll open the call for your questions. I see that we already have quite a few people in the queue. In the interest of time, please stick to 1 question and 1 follow-up. Matt and I have additional time with many of you today to fill in some of the gaps. I invite anyone else who'd like to set up some follow-up time to reach out to me directly. With that, let's move on to today's call. As always, we'll be making some forward-looking statements. I want to caution everyone that our actual results could differ materially from what we share this morning. Investors should familiarize themselves with the full range of risk factors that could impact our results. Those can be found in our Form 10-K, which is filed with the Securities and Exchange Commission. Please be aware that today's call is being recorded. An archived version of the call will be available on our investor relations site at scottsmiraclegrow.com. With that, let's get started. I'll turn things over to Jim Hagedorn. Thanks, Amy. Good morning, everyone. I talked in our last call about the challenges of fiscal 2022 and the hard choices and aggressive actions we took to return the company to acceptable levels of profitability. I stated that our leadership team was on it and that we had full confidence in our ability to right size the business and drive value for our shareholders. This brings me to today. For Q1, we exceeded our total net sales goal on the strength of the U.S. consumer business and the scrappiness of Hawthorne to find opportunities within a struggling cannabis market. Record consumer shipments to retailers result in strong load in, an indicator of confidence in the consumer this lawn and garden season. I'll sum up Q1 this way: There is light ahead. We are moving in the right direction. We have more work to do, once again, we're on it. Our Q1 results reflect a transformation within Scotts Miracle-Gro. We're operating as a very different company than a year ago. We've reoriented our business. We're leaner, but more focused on driving the greatest value. We've strengthened our financial position. We're demonstrating discipline. Most importantly, our entire company, across all functions, is performing to the highest levels. Let me provide context. For Q1, we're working against tough comps in the U.S. consumer segment, where in 2022 we posted a profitable Q1 for only the second time in our history. Consumer engagement remained high ahead of a year that ultimately was impacted by retailer shipments not keeping pace with demand. What our current Q1 numbers do not show is the exceptional performance of our Scotts Miracle-Gro associates in a much more challenging environment. They never blinked, and they have approached 2023 with grit and a winning attitude. They are making our operating plan a reality. Here's a snapshot of what their hard work accomplished against our internal targets. Net sales that beat the plan by nearly $25 million. Gross margin improvement of almost 300 basis points against our plan. EBITDA of $21 million against an internal forecast of zero. Net leverage of 5.9x debt to EBITDA, comfortably within the covenant maximum of 6.25x. We're ahead of schedule and overachieving on Project Springboard, tracking to exceed the original cost savings guidance for the year. We're guiding to mid-single-digit decline in SG&A versus fiscal 2019. Overall, I'm pleased, but it's too early to declare outright victory. As I said, there's still more work to do. We're reaffirming our outlook for the U.S. consumer business and how we see it performing for the full year. There has been a massive company-wide effort in Q1 to make the lawn and garden season a success. Hawthorne continues to operate in a tough market. We're committed to increasing its return level, bringing it to profitability by year end. This is less about sales, although the team is working hard on this front, and more about unwinding the overbuilt supply chain and excess inventory. So far, we've achieved a 40% reduction in warehousing costs and reduced SG&A and inventory by 1/3. Additional optimization and operating efficiencies are in the works. I want to provide more color around our core business, as there are two dimensions to it. First, building momentum and making sure retailers are fully loaded and all in with us. We accomplished this in Q1. Second, motivating and energizing the consumer to visit stores, browse and shop online, and to load up with our products. This is our focus in Q2 and Q3. We will attack both quarters with the same resolve as we did in Q1. Early engagement is critical as we know consumers who make their first lawn and garden purchases before May spend twice as much in the category. I told you last quarter that despite our cost reductions, we would not stop making high value investments to enable growth. This year, we're increasing investments in marketing and promotions, doubling our lawn spend over last year. Overall, our total work in media spend is nearly 25% higher than in fiscal 2022, and it will be more efficient and targeted. Total media spend this year will be even higher than the pre-pandemic year of 2019. As you know, the early season has already started in the South. Omnichannel campaigns, radio, television and digital activation are already underway. We're seeing positive POS growth in the South, where in the past two weeks, Bonus S is up 68% in Florida and 54% in Texas. We're also seeing strength in grass seed during the same period, with +24% in Florida and +65% in Texas. In March, we'll launch a national early season lawns campaign. Miracle-Gro is partnering with Roku and Martha Stewart to support her new show, Martha Gardens. In this month, we'll begin the largest product launch in Roundup's history with the introduction of a new dual-action non-glyphosate formula. These are just a few examples of what's coming. Our investments are being coordinated with retailers who are increasing their spend on joint media promotions and in-store activations. Lawn and Garden is the leading driver of foot traffic early in the year, and our combined efforts can have a three to five times multiplier on POS. I stand behind our operating plan. In a few moments, Matt Garth, who became our CFO on 1 December 2022, will elaborate on the Q1 numbers and our fiscal 2023 outlook. First, I want to revisit our long-term strategy. Although we're managing our business quarter-to-quarter, we're starting to do so with a view toward growth. In fiscal 2021, we unveiled a five pillar growth strategy. I am reaffirming the strategy. Three of the five pillars relate to the consumer business and the others to Hawthorne. On the consumer side, the Lawn and Garden pillar is a mature, steady generator of cash. The bulk of the new gardeners who entered our category during the pandemic are still with us. We see sustainable growth with our brands and continue to engage consumers through marketing, innovation and packaging, formulations and products. This includes drought tolerant solutions to create living landscapes that work in concert with the environment. The second pillar is direct to consumer, a component of category growth that includes our e-commerce and retailer dot com sites. A strong online presence enhances brick-and-mortar POS. Direct to consumer platforms are used to learn and shop for products. The Lawn and Garden omni-channel shopper, one who shops online and in-store, spends two times as much in our category than an in-store only shopper. With this in mind, we've improved our online product content and visibility, and last month we migrated to a new e-commerce platform for improved efficiency and enhanced marketing and personalization tools across 10 brand sites. The third pillar, Live Goods, is a natural gateway for consumers in their Lawn and Garden journey. Consumer purchases of vegetables and herbs have remained steady over the past two years, and almost 60% of edible gardeners intend to plant more over the next two years. We're strong believers in growth opportunities through Bonnie Plants, where we will execute with enhanced precision at growing stations and retail stores, as well as invest in innovation to inspire more consumers to grow their own. I'll now shift to Hawthorne, where our strategy is twofold. Number one, we will retain Hawthorne's competitive advantage in the cannabis non-plant touching space and professional horticulture. We are the leading solution provider for growers, which differentiates us from those who are primarily distributors. Number two, through our investment in RIV Capital, we will position ourselves to become a key player in the consumer and retail cannabis space in New York, projected to be the second-largest cannabis consuming state behind California. Digging deeper into Hawthorne, I've explained how we integrated back office functions and are optimizing our network. We're winnowing our focus. Just as importantly, we're innovating. Our scientists in Kelowna, British Columbia, the first R&D facility in North America devoted to cannabis research, are running trials on lighting, nutrients, genetics, and other technologies to improve yields, quality, and energy efficiency. Similar work is underway on hemp in Oregon, Florida, and Ohio, where we opened a controlled environment facility to supplement our greenhouses. R&D's work led to the launch of the market's most advanced and efficient LED ever, the Gavita 2400e. We've continued to innovate with the WEGA LED lighting portfolio for indoor growers of vegetables, fruits, and flowers. WEGA is expected to have surpassed last year's unit sales in Europe and North America and is now 1/6 of Hawthorne's business. We capitalized on the trend toward indoor agriculture, an industry by some accounts, is about $40 billion annually in the U.S., with a projected annual growth rate of 13.5% through 2030. Additionally, by modifying the light spectrum for the WEGA, we can make it an excellent no-frills LED option for cannabis growers. One final point on the cannabis industry: when it does recover, and it will, growers will be ready to invest in CapEx. We will be there to support the turnaround. Consolidation is happening in the industry, and we see opportunities for high value, no cash partnerships to further strengthen Hawthorne's ability to provide value-added and innovative solutions to growers. I'll shift to the consumer side of cannabis through our convertible loan to RIV, an integrated cultivator and retailer in New York that owns the Etain Cannabis brand. RIV holds one of 10 vertically integrated licenses that includes a growing and processing operation and four dispensaries. It's developing a state-of-the-art indoor growing facility in Buffalo. From a regulatory perspective, New York has tripped over itself in developing and implementing rules, which has prevented the market from reaching its near-term potential. Let me make this clear: New York will become a monster market, and we'll see it through. There is progress and value in our investment with RIV. To summarize, we have adjusted the speed which we are moving forward in our strategic pillars. We have shifted from an accelerated pace to a prudent but steady investment approach that strengthens our ability to grow and drive shareholder value. When we're able, we'll shift back to a more aggressive shareholder-friendly bias. We remain focused on cost control, EBITDA, and free cash flow. When we spoke last quarter, we committed to $185 million of annualized savings across the two phases of Project Springboard by fiscal 2024. We will achieve the full $185 million in savings by fiscal 2023 and now have line-of-sight to additional savings in excess of that commitment. Reflecting on the year, times like these illuminate the resiliency and strength of our business and the determination of our associates. We have exceptional leadership and talent. We're bringing rigor to our financial processes, forecasting, and capital allocation at an important time in our transformation. It's been a real pleasure to work with the leadership team and the board of directors, which has been a great partner to me and the executive team. I also want to thank our retail partners and banks. Their support and commitment has been invaluable and will contribute to our mutual success. Thank you. I'll close with this. Consumers have emotional connections to their lawns and gardens, which is reflected in our vision statement. We help people of all ages express themselves on their own piece of the Earth. This comes to life in our leading brands, innovation, and products to meet diverse needs. Through good times, pandemics, and recessions, people consistently turn to us to enhance their lives. I've often said there's no better business to be in. This is true today as ever. Thank you. Now I'll turn this call over to Matt. Thank you, Jim. Hello, everyone. I would like to begin by noting my excitement with being a part of the Scotts Miracle-Gro family. I've long been a consumer of the company's products and have firsthand knowledge in achieving a great lawn, applying Turf Builder four times a year, and creating a productive garden using Miracle-Gro soil and plant food. I've been warmly welcomed into the company and was transitioned expertly by Dave Evans as he wound down his interim CFO role. Since joining, I have immersed myself in operations, marketing, sales, human resources, and of course, the finance practice. To summarize my experience so far, we have an outstanding team that every day reinforces the open, transparent, and accountable culture created by Jim and his team. As this quarter proves, the collective effort to improve the company's financial strength through Project Springboard is delivering. The discipline focused on improvements and savings will continue while we also invest in our future and innovation to extend our leading positions and create significant long-term value. Let me turn to the Q1 performance. Record December shipments in our U.S. consumer business delivered Q1 segment sales 8% higher year-over-year and combined with the robust savings from Project Springboard that Jim referenced more than offset early softness in Hawthorne. We now expect to achieve the $185 million of annualized Springboard savings by the end of the fiscal year, well ahead of our prior commitment. Springboard actions and the continued urgency of our team will create additional upside as we move into 2024 with potential savings above $185 million that we can direct towards innovation, consumer activation, and growth. Net leverage at the end of the quarter was 5.9x Adjusted EBITDA, comfortably within our covenant maximum of 6.25x. Let's move on to the P&L, beginning with sales. Net sales on a company-wide basis were down 7% versus Q1 last year. Sales growth in U.S. consumer reflected the strong partnership with our retailers for the early season build-out. The sales and supply chain teams were outstanding in their execution and coordination in delivering on customer expectations, including getting some Q2 volumes out in Q1. For the first half, we still expect the load-in to be aligned with our original plan and slightly higher than the first half of last year. Q1 POS at our four largest customers was in line with our expectations, ending down 19% in units and 8% in dollars. The POS unit declines are consistent across our key customers and categories. As we discussed last quarter, we still expect full year POS units in fertilizers and grass seed to grow by 10% and unit volume and other product categories to remain essentially flat versus fiscal 2022. Early season performance in our southern markets indicates that we are tracking well against our expectations. Recall that Q1 represents less than 15% of the full year, and our focus is appropriately shifting to our peak season in Q2 and Q3. As we entered the year with retailer inventory units slightly down versus prior year, the strong Q1 load in and the expected decline in POS have brought retailer units slightly higher. Replenishment orders in the second half will be driven by consumer takeaway and the inventory management actions by retailers. Our plans align with our retail partners' year-end target inventory positions, and we are monitoring the consumer condition to ensure we act quickly to align production with any changes in demand levels. Turning to Hawthorne. Continued industry-wide challenges yielded a 31% top-line decline year-over-year. This result was driven by lower retail and professional grower activity stemming from oversupply and general uncertainty on when the market will become more balanced. Our original guidance estimated Hawthorne sales would be flat to down low single-digits for the full year. Given the soft start for the business and the state of the industry as a whole, we now expect Hawthorne sales to decline 20%-25% year-over-year. There are many reasons to be excited about the future of Hawthorne. We're taking the appropriate prudent actions to achieve run rate profitability by the end of the year, while also strengthening our position for the future. For the full company, we previously guided to low single-digit sales growth for the full year. We now expect that a low single-digit sales decline in fiscal year 2023 is a more reasonable expectation given the market challenges Hawthorne is facing. Gross margin for the quarter was 20%, down 90 basis points versus last year. Strong U.S. consumer volume and pricing, better segment mix, and sooner than expected progress against our Springboard targets largely offset lower Hawthorne sales and higher conversion and commodity costs. We continue to expect that gross margin will decline slightly in fiscal 2023 as the impact of lower Hawthorne volume will be offset by Springboard savings. As explained on the last quarterly call, commodities are now about 1/3 of our total cost of goods sold due to historic inflation levels. At this point, we're about 65% locked on our total commodity costs and north of 70% locked on total COGS. We have a fairly good visibility for the rest of the fiscal year. We are seeing some bright spots in international freight rates, resins, and pallets while our larger inputs like diesel and urea continue to move with underlying energy-related commodities. The team has executed well in working with our customers to manage inflationary costs and delivering pricing to largely cover our dollar exposure. Our progress on Project Springboard is most evident on the SG&A line, which is down $26 million or 17% versus last year. We got it for full year SG&A to be below fiscal 2019 levels. Given our Q1 result, we now expect a mid-single digits decline from fiscal 2019. Moving further down the P&L, interest expense is up mainly due to increased borrowings and higher interest rates. Recall that we guided to additional interest expense of up to $40 million in 2023. Given the move in SOFR and our spread at current leverage levels, we now expect incremental interest expense to be closer to $60 million for the fiscal year. The adjusted effective tax rate in the quarter was 25.5%. We anticipate the full year ETR will be between 26% and 27%. I'll also note here that we anticipate fully diluted shares will increase by approximately half a million shares through the end of the fiscal year. That brings us to the bottom line, where our net loss for the quarter on a GAAP basis was $65 million or $1.17 per share, compared with a loss of $50 million or $0.90 per share last year. On an adjusted basis, which excludes impairment, restructuring, and other non-recurring items, we reported a loss of $56 million or $1.02 per share, compared with a loss of $49 million or $0.88 per share a year ago. On a total company basis, the overall year-over-year decline was completely driven by non-operating factors, mainly higher interest and tax expense. In fact, Adjusted EBITDA improved to $21 million this year versus a loss of $1 million last year. Adjustments to arrive at non-GAAP Adjusted EBITDA from our net GAAP operating loss in the quarter are detailed in the press release financials and include $19 million related to our ongoing restructuring efforts, including Hawthorne, integration costs, and other Project Springboard initiatives. We are modifying our full year Adjusted EBITDA guidance given lower than expected depreciation expense, mainly due to the timing of capital expenditures and Hawthorne impairments. We now expect the full year increase in adjustments to be less than $20 million, resulting in low single-digits growth in full year Adjusted EBITDA. Let me turn to an update on our capital allocation approach. We face no near-term refinancing risk and ended the quarter with over $800 million in undrawn revolver capacity. We expect to manage the seasonal working capital build through this year and stay within our financial covenants. We will direct our free cash flow to debt pay down, targeting a net leverage ratio below four by the end of fiscal year 2024. We're deploying CapEx of $100 million in 2023, funding maintenance requirements and high return, short payback projects. Our outlook also includes continued support for our quarterly dividend. In sum, we will maintain tight capital discipline and drive leverage down while ensuring we fund the innovation and capability to deliver long-term growth at SMG. Please keep in mind the guidance that I've provided is not without risk. We are diligently managing what is within our control. Performance in the back half of our fiscal year is largely driven by consumer engagement. We have an aggressive and creative plan that is in lockstep with our customers to activate the consumer early and throughout the season. I also share Jim's excitement about the long-term prospects for Hawthorne and the potential for growth and value creation in the business. Let me close by putting the Q1 into proper context. Q1 is typically less than 15% of our full year. The peak of our year is fast approaching, and I have confidence in the plans we've put in place and the ability of Mike Lukemire and his team to execute. With that, I'll conclude and return the call to the operator so we can take your questions. Thank you. Thank you. As a reminder, if you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. One moment while we compile the Q&A roster. Our first question comes from Jon Andersen with William Blair. Your line is open. Hi, good morning, everybody. Thanks for the question. Hey. I wanted to ask first on the U.S. consumer business, two, two parts. One, you know, can you talk a little bit more about any early season reads that might kind of enhance your confidence in, I guess, particularly the lawns business and the recovery that you anticipate in the lawns business in 2023? The second part is, you know, I'd love to hear a little bit more about the marketing plans. You're talking a lot about kind of leaning in and activating consumers early in the season across the country and how important that is. You know, have you taken that approach in the past? Has it been successful? What are some of the details around that? Thank you. Okay, Jon. Hagedorn here. I've told people I'm not gonna, like, try to answer all the questions, this is a good one. First, let's start with the budget we put in. You know, I think it, you know, people can say, well, you're sandbagging or whatever. We think we are pretty conservative by putting basically flat in. Remember, lawns was down 20% last year, our view is almost entirely on weather. California, Texas, Northeast, Midwest, which, you know, I don't need to go through that again. It sucked. We're +10 with lawns, 0 for everything else. We don't think we have a particularly challenging number because I think many of us who've been in the industry a long time said, you know, it was just a very challenging weather year for us. I think the same is true in agriculture. Anybody who's following, I think, knows that we speak the truth here. The early season numbers on lawns actually look pretty good. You know, I don't know, Mike? Yeah, no. I mean, the last two weeks are up 57%, 64% and where we applied promotion, it's moving. We need lawns to, I mean, we do need lawns to work. In addition, I think Bonnie is seeing similar kind of like very positive numbers early season. You know, I think the early season, It's conservative numbers, and I think these early parts of the season look pretty good so far. I'd say that. Patti, you wanna talk about, like, Patti runs the brands. Good morning. [crosstalk] You want, o h, no, you can't. No. The team, the SBU leaders and the marketing partners, we are really excited about the season, and we are particularly pleased with our early season activity, which we've already seen in the south working well with our Bonus S product offering. We have a program and partnership with the retailers, that we are launching in very early season to reflect Jim's comments earlier about how we know that early season consumer spends more in the category. The program is named DayLawn Savings, and we are doing that in partnership with our retailers and getting out even ahead of their Black Friday promotions. We will continue to support this consumer, get them in the category early, and, we're excited about the potential of the program and what it's gonna do to stimulate activity. The spend is real high. Yes, very high. Nobody's messing around here. I think the retailers want it to work. We want it to work. We're spending behind it. We've got new talent on the sort of regular lawns advertising. You know, we replaced Scotty the Scotsman with a new personality and the big event at the beginning of the season. We're not. You know, I think part of what we had happen last year, Jon, was we We were sort of waiting for weather before we fire, you know, our activation dollars. We never just had that weather. There gets to be a point where if people haven't bought and it's getting late in the year and the weather is kind of cool and wet, and people say, "My lawn looks great anyway," there's a big reason to get them out early. It's a little bit of a back to the future approach, but it's very well coordinated and being spent against very heavily. I think we feel pretty good about it. The POS so far, I think, says there's no significant problem with the consumer at the moment. Thank you. I'll leave it at that. Thanks. Thank you, John. Thank you. Our next question comes from Joseph Altobello with Raymond James. Your line is open. Thanks. Hey, guys. Good morning. Hey, Joe. I guess question on U.S. consumer as well. Retailer inventories, you touched on this. Sounds like they're a little heavy. How much of a headwind might that be to your shipments this year? To our plan, I would say that there is no problem with that part. We're just looking at. In our plans, we baked in that they may wanna bring them down based on POS a little tighter, but that's a conservative look. They've not really talked about it, that they have significant amount of inventory. Yeah, Joe, in my prepared remarks, what I said was, we've came into the year with retailer inventories low and with the strong December that we had, plus lower year-over-year POS, those inventories have come up. However, the retailer inventories are still below where they were last year. Yeah. I think we were, like, 7% below last year at the same point. Yeah. I think internally, Joe, the conversations here, clearly, we had a positive Q1. A lot of work went into that. I think Luke has been pretty clear that, you know, sales that came in in Q1, he's not really changed his first half load plan. You know, we're not assuming that, you know, it's additive. I think Luke is being conservative for the first time ever. I'm worried about running out of product because I think it's gonna be good. I don't know. That may be our biggest issue, Joe, is just that we're just working really hard to keep the supply chain tight. Okay. That's helpful. Maybe, maybe on Hawthorne, you know, three months ago, the outlook for that business was, you know, call it $700 million of revenue this year. Now we're looking at, you know, roughly $550. It's changed pretty dramatically, you know, here in the last, you know, couple of months. I guess, one, have things gotten that much worse, or did you expect some sort of recovery? Two, assuming revenue of $550, what does that mean for segment loss in fiscal 2023? Hey. Joe, it's Chris. I'll take the first part and let Matt take the second part. Yeah, it's really, it's sort of your latter assumption there is that we had baked an assumption of some market recovery in the earlier part of this year into our plan going in. We still expect to see some recovery in the marketplace, but it obviously didn't materialize this quarter the way that we've been hoping. Now, I mean, I think it's worth noting. I, you know, I got a text message from a contemporary of ours, Ross, yesterday. This is someone who, you know, he was the president and CEO of General Hydroponics when we bought that business and someone we've stayed close with over the years and very plugged into the industry. He reached out to me unprompted yesterday and said, "Hey, I've been thinking about you and just want to let you know I feel the wind's at my back out here in California for the first time in a long time." We're starting to hear some rumblings and seeing some signs, I think that the industry beginning to gain traction. Obviously, with the way the last year plus has gone, we're gonna wait before we start counting our chicks. I'll let Matt take the second part. Yeah. On profitability perspective, we weren't really calling for a significant increase or additive EBITDA to our full year projection coming from Hawthorne. If you remember, coming from where we were last year, doing the efforts through Project Springboard to realign the cost structure with where we are from a demand and revenue component, that was gonna bring us to some positive EBITDA contribution. Now, with this call down on top line revenue, that brings it down a little bit, sort of hovering around break even plus five. So we're gonna navigate that as we continue to go through the rest of the year. Like Chris just said, whatever bright spots are there, they'll kind of mitigate any further downside that may come. We sort of split the difference on that 20%-25% outlook. Coming off of a 31% down Q1, we're calling again up for quarters going through the rest of the year. That is some positivity that we see. Okay, great. Thank you, guys. Thank you. Our next question comes from Chris Carey with Wells Fargo. Your line is open. Hi, good morning. Hey. Just, I just wanted to, you know, confirm, you know, U.S. consumer. Shipments flat for the front half of the year, just to be really specific, would imply, you know, shipments being up in Q2. With the expectation for POS for the full year, well, obviously, shipments are gonna track below. You know, is it are you saying organic sales growth for the U.S. consumer business should be up in the high single-digits this year and maybe shipments are not down that much? With that sort of outcome, would you expect margins to be able to re-expand in the U.S. consumer business, or is the, you know, commodity, you know, impact and the other things that you're seeing still going away? Let me clarify something there. What we're calling for is on the top line. When you look year-over-year, you're actually seeing overall volumes down, as we pointed to in the call last quarter, but we are pushing through the pricing. That pricing that we put through is carrying through, and you see that in the press release detailed very nicely. The first half of the year will be slightly up on revenue. Again, if you look at that Q1 performance, outpaced what we thought, and Jim spoke to that. We probably pulled in kinda $8 million-$10 million from Q2 to Q1. Jim also just said that we're forecasting that we're gonna hold that as we move into the Q2. That proves out a really strong first half. Again, volume's slightly down, meaning shipments, but that pricing coming through. From a POS perspective, you're absolutely right, and I'm gonna speak to this in two components. One, what's been demonstrated and how that's performing, and you heard that from Texas and from Florida, the early spring season areas of the country performing well and showing good signs of consumer engagement. That leads to where we stand for later in the season here in the Northeast and other parts of the country as things start to warm up. Again, still looking for a POS that is going to be slightly down. Again, pricing, very strong. As Mike just said, should the consumer come in at a good level, recall that we've made adjustments to our operations. We are producing at a lower level at this point, to help us from a cash perspective. We will be working very closely with our customers to ensure that they have the product they need should POS come in stronger. You know, look, of course, Jim here. I would say from my point of view, I'm not sure what Mike would say on this, you know, we struggled, I think, pretty heavily with Dave as we kind of put together our forecast for 2023. Mike and I basically just plugged zero. It's not because we think the consumer is sick or anything. We just wanted to put a conservative number in, + 10 on lawns after - 20, which we thought was weather-related, we thought was also conservative and safe. We were basically looking to build revenue numbers that were safe. I personally wouldn't read a lot in that. I think at next call, we're gonna know a lot more how the consumer's doing. I would not try to put too much precision into our forecast. This was a pretty wicked discussions internally on just what we wanted to commit to and not get on the wrong side of everything. The flat was not because really anything other than we just wanted to put a number we were confident in after what we just viewed as a really crappy year last year. Yeah, that makes sorry. [crosstalk] When you say flat, you mean your organic volume shipments in the front half of the year, you're expecting flat, just to be clear. Sorry. It's, I just wanted to confirm that. I didn't mean to interrupt. No, no. Dude, it's okay. You're the one asking the questions, and we're here to answer. Volumes are gonna be slightly up in the first half across all categories. When we're talking, I guess, the outlook that I gave, Chris, just to be specific about that slightly higher year-over-year for the first half is on the top line. Great. Yo, if somebody's got something to say it. Just, 'cause people here are all motioning. We're good. Okay. Okay. Then just as a follow-up, you know, for the Hawthorne segment, right? This glide path to improvement in profit by the end of the year? Are you saying that you expect by fiscal Q4 that, you know, the segment profit should effectively be zero? That you're running neutral, and between now and then, you're running negative with, a gain, the idea is to get flat by the end of the year and, you know, t hen just, you know, on that, do you have any view on U.S. consumer margins, you know, the ability to be up or down, you know, just on the prior question? That's it for me. Yeah, I think that's obviously, you're coming out of the Q1, you're seeing the segment profitability in Hawthorne. Yes, the glide path as we move through the year will be improving. I think we're gonna get another bite at that apple here in the Q2 as we start to see some seasonal uptick. We'll keep you abreast of what's happening in Hawthorne next time we speak and the full year outlook there. Yes, progressively improving as we make our way through the quarter. From a U.S. consumer margin perspective, you've seen a lot actually take place in terms of w hat we had expected, I think what we had originally communicated, versus last year, what we were able to do. The performance of the team, the costs that have come out of the business, the efficiencies that we're running have put us, and you saw it in the gross margin line as well, in a good position to start to begin to think about how you recover back to those sort of early 30s, mid-30s type margins in U.S. Consumer that Mike likes to talk about. That is gonna be a combination of higher volumes coming out of the production facility. That's gonna come with time, and maybe we can get some of that this year. Remember, we called that down for this year. The other component of that is gonna be what happens on the commodity side. Watching that, and like I just said in my prepared remarks, we have about 70% of our COGS already tied up, so pretty good outlook for this year. That'll be helping us progress back to those margins as we move forward. No, I think it's gonna recover as the commodities adjust. We also have a bunch of costs down as well. Yeah. Then mix is always a factor for us. Strong on season, it's a good mix. I'm pretty optimistic we're gonna get back there over time. Yeah. Okay, thanks so much. Thank you. Our next question comes from Eric Bosshard with Cleveland Research. Your line is open. Good morning. Hey, Eric. Two things, if I could. First of all, Matt, you talked about upside to SG&A saves into 2024. I just wanted to dig in a little bit to 2024. Obviously, we got a long ways to go in 2023. As you think about the amount of SG&A you've taken out of the business, and this is mostly on the consumer side, I'm just trying to get a sense of how much do you have to reinvest back into the business in 2024, to serve customers and to drive the business? Is the cost structure and the operating structure in 2023, what's sustainable and then growth in 2024 and beyond, levers off of that? Well, I'm gonna take that from Garth to start at least. You know, if you look at our in-store merchandising sales force, we're in good shape there. If you look at the innovation work that's happening in R&D, we're in good shape there. We are definitely a skinnier team than we did, except, you know, Eric, you might remember that our biggest issues as we were chasing these five pillars was you and what army. We hired a lot of people, so we're kind of back. It was, d ude, I, you know, I sort of figured, like, I think people are starting to feel better around here, but there was a lot of PTSD here. This has been a goddamn trip. I think that the teams are smaller, a lot in this building, a lot at Hawthorne, and I think that that's pretty much where we plan to be. I don't think we have a lot of spring back where we have to fill in a bunch of gaps and we're not doing things we should be doing. I think we've been really mindful of trying to spend the money where we need to spend it. Marketing dollars are up. In-store dollars are good. I think we're pretty well configured, and I think, you know, we have not committed to everything that we think we can do. That's, I think, what Garth is sort of pointing at and saying there's more sort of sustainable, cuts to G&A that you'll see in 2024. I don't think, I don't think any of the teams are really saying we need a lot more people. I think we were pretty careful in. You know, if you look in my hallway, there's a lot of different people here now on my side. I think we've been very careful to say the people who stayed are people who think we can operate this business much tighter than we were before. It's, it's really the growth. We were chasing that growth. I don't think we were unusual. I think a lot of companies right now are talking about that. We were pretty careful to select people who like the way we set up now. If people acted like they didn't like it, they're not here anymore. Mike, anything you'd add on that? No, I think we're streamlined. I mean, this, I guess my nineth year of being a president and COO. When I first took over, it was pretty streamlined. We invested in a lot of things to chase growth, and I think we've readjusted, but we're not cutting the fundamentals of sales and marketing and our foundational things. We're just more measured as we build back. We still want that growth. We still believe in that growth. How we get there will be a lot more efficient. Okay, that's helpful. The second question, Jim, you mentioned the pillars. On Hawthorne, I just wanted to understand a little bit better your perspective. You know, a quarter or two ago, I think you wrote off maybe $1 billion you had invested in this business. A quarter into this year, you took the revenue target down by 20%. I guess I was a little surprised to hear you say we're still committed to the two Hawthorne pillars from 2021 when that world has changed, you know, so dramatic that you had to write off basically the capital you put in the business. Why still commit to those pillars? I guess I'm just trying to figure out your vision. Sounds like it's the same it was two years ago when this world was changed. No, I wouldn't say it's. [crosstalk] ever since versus now. I wouldn't say it's the same. I think we've been... You know, and listen, we run our own business, and so I'm not blaming anybody and acting like a victim here, so don't misread what I'm saying. But, you know, we kind of paid for that business. We still believe in the growth of the cannabis sector. It is a bloodbath out there. I don't know, that was Forbes or Fortune, like two or three years, said it's gonna be a bloodbath. Well, it has been. But we're invested there and, you know, we look pretty carefully at our business. You know, Garth coming in, with Mike and Chris and myself and sort of saying, you know, "Who do we wanna be?" I mean, this gets down to the sort of pillars. I think there was a group of people in here who said, "You know, we should just be the best little Scotts company we can be." You know, it's a kind of low single-digit growth rate. You know, this is not chasing the value of the equity, but it basically says, what we get from direct-to-consumer, what we get from Live Goods, what we get from Hawthorne is growth. We got on the wrong side of that. We paid for that. We've taken the pain for it, and the question is, do we just throw it, you know, set it on fire? You know, I had a situation with Smith & Hawken, where during the, you know, economic crisis in 2008, you know, we bought that. I think we had thought we had a deal with The Home Depot. It didn't come together, in a kind of weird, screwed-up way with Nardelli. You know, Dave was the CFO back then, and he said, "Look, we don't have a forecast for profitability here, Jim, and nobody's putting it together, and everybody's contributing. Smith & Hawken, you need to make a decision on Smith & Hawken." He put it directly on me, and I sort of, we burned that thing, you know. We auctioned off the pieces, and it was a pretty bad experience. I regret it today. Smith & Hawken or Hawthorne is not in that same situation. You know, if you could say roughly that half of the profit of Smith & Hawken, or, fuck, Hawthorne is, we burned by setting up a supply chain that was just bigger than clearly we need right now. You know, that is worth, I'm gonna call it, north of $50 million. You know, I think this business can get back to pretty easily kind of a 10% EBITDA margin, and that's kind of my view of opening stakes to sort of be a contributor here. I think we get there, and I think a lot of this happens because we resize that supply chain. It's harder than you think because there's a lot of inventory there. We've gotta work through it, and we will. I think we believe that there's growth in that business, that it's about as screwed up as you can get. I blame a lot of this myself on very poor public policy. I mean, all you gotta do is look at New York and say, "Could it possibly go worse than what's happening in New York?" Remember in California, they went recreational in California, and the entire country was down 50%. You know, SAFE Banking didn't happen. There's a lot of things that we thought would happen. If you want me to, y ou know, I do think, 'cause I do reflect occasionally, and I think we assumed you'd have federal normalization by now. That has been much more challenging than we thought. I think that, you know, you look at Oklahoma and Michigan as far as issuing permits far in excess of what the states require. It just, it's pretty screwed up. We just think we're fully invested in this space. We are committed to seeing it through. We think it'll give us a growth rate that's in excess of what the consumer business can grow. Ultimately, we think we need to show growth. We can do it profitably. I don't know, that's my view. No, I, [crosstalk] Garth, you got a different view? Absolutely not. As you said, we sit down on a, as a team and go through this on a fairly frequent basis. You're sitting right now, Chris, and I think you're very aware of this. Eric. Oh, Eric, I'm sorry. Yeah, I've been moving backwards. Eric, you're aware of this. The industry itself, as Jim just outlined, probably not in the most advantaged position. However, what we do, and I think this is not just me saying it's everyone in the business, is fairly unique. The proposition that we have, the strategic position that we have, the customer position that we have, all put you in a very good place for an industry that has a somewhat longer timeline than we thought. That being said, you also heard Jim talk in his prepared remarks that this opens up some strategic options for us, which are we feel we're in an advantaged position given what we bring to the market, and there are others out there who may not be in that position, but we can all benefit with together. Just looking at it from a holistic perspective, how you maneuver through this market, how you strengthen our position, and how we set up a business that on any type of recovery is in a strength and winning position is what we're looking to do. Understood. That's very helpful. Thank you. Thank you. Our next question comes from Andrew Carter with Stifel. Your line is open. Hey, thank you. Good morning. I wanted to ask about Hawthorne, just get digging into it, like the 31% decline. I know WEGA is completely incremental. I think you said a six. Is that a sixth incremental? Could you also dig into kind of signature brands versus non-distributed and how much of that non-distributed kind of rational or kind of shift in focus you're making this year kind of is reflected in your top line outlook for this year and also in the quarter? Thanks. Yeah. Hi. Belly up to the bar, guys. Yeah. Hey, Andrew. We're looking this year at a signature to distributed breakout of about 65% on the signature side of things. Lighting and nutrients continue to drive that for us. The question is, are you focusing on your products versus distributors? Andrew. Hey, it's Chris. I mean, the focus is, and Tom can give you, again, more specific numbers, and certainly Aimee DeLuca and Matt in follow-ups. The philosophy that we're moving towards here, and this is really, you know, as we look at how the market has evolved and frankly constricted here over the past year, the philosophy is certainly to move towards more of what we're calling internally a Signature+ model, which is to focus much more on our own brands. We have some distributed brands that we have unique relationships with. These are brands like Quest dehumidifiers. Then there's other brands and products, that are, at least currently, we think, essential, you know, parts of our portfolio, parts of our offering that we don't make a great deal of money on and we don't feel like are great value propositions for us, but again, our customers require them. I'd say we're in a transitional period right now, moving from what has really been a distributor business, with a slight emphasis on our, on our signature brands to much more of a signature offering. Yeah, just to emphasize, I guess, Andrew, key focus on the brands that we own, the brands that we've developed, the innovation that we continue to develop, and continuing to also take a hard look at partnerships out there in terms of where there are other key pieces of the category that make sense for us to stay really close to, all in the spirit of doing the right thing for the grower. Got you. Just to be clear, I guess the, I guess I'll say my question better. That 65, 35 split, I guess I was asking, do you expect that 35 to go down quite a bit through the year, i.e., an added headwind to sales, but one that, I mean, might not show up much as pro, t hat's what I was asking. Do you expect that split to move meaningfully and any kind of associated headwind? Hey, Andrew. I think for the balance of the year, it'll probably remain relatively steady, that 35% distributed ratio. Again, I think that the shift towards Signature+ is gonna be something we'll see more over the course of, I'd say, the next 24 months or so, is that, you know. We expect that we'll be able to replace a significant portion of those distributed sales that we'll be choosing to move away from, with Signature sales. What we're hoping for is not a huge step back in terms of overall top line revenue from those sales. Again, that's not considering what we expect to see in terms of recovery in the marketplace, but a good deal more profitability on each dollar for dollar sale. Got it. I'll pass it on. Thank you. Thank you. Thank you. Our next question comes from Bill Chappell with Truist. Your line is open. Thanks. Good morning. Hey, Bill. Just a few things. One, I guess looking back at Q1, I'm a little confused of was this significantly better than you expected or was it more of a timing of shipments? You said, you know, last year part of the problem was retailers didn't order in line with demand. I would assume that there would be, kinda out of stocks or inventory that you had to replenish. You also said that there was too much inventory at retail. I think you had said there were some Q2 shipments that came in Q1. Help me out understand, like, is this kind of a, it's a good start and, you know, we'll know more later, or are you really ahead of plan starting out? All right. I think I understood, although it became somewhat garbled, so I don't know if you're on a cell phone, Bill. I think the quarter, I think the quarter was a lot better than we thought it was gonna be. Remember that we had in December. We were really managing, you know, at least I was very focused on sort of leverage in the quarter. We had agreements with our retailers on a rational first half load. We probably came out a little bit better, not by much, but I think we said $25 million better. That was not without challenges in that we had that period right before Christmas where it got really cold and shipments became a little bit painful. I think the supply chain team did a fantastic job kind of managing orders to get them out. I don't think we have a inventory problem at all at retail. I think that the Springboard work, which was the entire company, did fantastic. There's no one person you can sort of give credit to. It was a real company effort under the gun to get the orders out and drive our expenses down, through a lot of, you know, very challenging sort of decisions that we had to make, especially regard to people. I think we had a good quarter. You know, for those people who know us well, and you do, you know, it was I think a lot of last year, you know, I think we take a step forward and it felt like get two steps backwards. Just things were. The great thing about this company is that this is a company that, with the challenge, operates well as a group. That all came together at the end of the quarter to a result that was better than we had expected. You know, we were working to stay within 6.25x. Coming in at 5.9x was a really good result for us. You know, a lot of people have written on where they thought leverage was gonna be for us. It is a big success for us to have gotten through this, and it goes back to our team and our retailers agreeing to sort of numbers. Not excessive load. This is a natural load for us. What we needed was commitments for Q1 and Q2 that would meet the load, but given our tightness for leverage, would make sure that as long as we could execute on our side, we would get the inventory in and had orders. All of our retailers were fantastic, getting product in, and our team did the work. I think it was a good result. Mike, I don't know. You know, I give a lot of credit to Luke, I give a lot of credit to the people who are running Springboard because this is a, you know, Springboard is a day-to-day, very intimate view cross-functionally at the numbers. Meaning that everybody had to do what they said. Any deviations had to be noticed immediately. I think in the past, we have not operated that tight, but this was a requirement for where we were. I think the sales and marketing side and the supply chain, the operating side of the business did great. Mike, you deserve a ton of credit for that. No, I think our retail partners working with us. We all wanna be ready. We're spending earlier. We wanna get out of the gate fast. We have to get the store sets done. We want the inventory in there. We do not wanna be chasing inventory. I think we're ahead of that right now. We want the consumer takeaway. Yes, Bill, that's another thing, which is that the retailers, everybody cares about sort of the spring season. Everybody wants, y ou know, has a weird concern about, y ou know, all you gotta do is read the papers. I think feels like it's kinda easing up a little bit, I think. You know, I think if you talk to the merchant partners, and you probably do, I think everybody wants the season to happen. So people are not backing away from Lawn & Garden. They're very much focusing on Lawn & Garden, and that benefit accrues to us. Right. Absolutely. Thanks. Then kind of, specifically on Bonnie. I mean, I know it's the gateway you talked about in terms of bringing consumers in. I think that business has underperformed your plan two out of the past three years that you've owned it, or have majority ownership of it. Well, I would say [crosstalk] I mean, is there something different that's going on this year? I would say urban vegetable actually performed well. We expanded into some flower, and that did not go as well, which the whole market was down, and our execution wasn't there. We're really focused on getting out. Early indications are. I mean, you're gonna see us much more integrated with our field sales in the Northeast. It's about execution and not getting out and throwing a bunch of plants away. I'm expecting a good year from Bonnie, very focused. Mike, I mean, fair enough, but if you look at the last couple years, have you been disappointed? I've been disappointed, especially in our expansion opportunities. A miss there. Too many varieties, not very good execution on some of our expansion opportunities. By the way, part of that's our fault. I mean, in that we've got a lot of say in what happens there. We push them into a lot of stuff. This doesn't mean against their, you know, what they wanted to do. I think that this is a huge volume business, and we've learned a lot, and change in that business has been, I think, harder. I think the team is on it, and I think Mike and the group down at, you know, our partners at AFC and the guys at Bonnie and Bonnie are pretty organized, and they know they have to achieve this year. Yeah. We tried to change a lot at Bonnie, and it was a little too much. But I love that business, and it is a gateway for us. I mean, it still has that 6%-8% growth, which is beyond the U.S. consumer, and with the tie-in and the execution together is a path for our future growth. Not giving up on it at all. In fact, I just wanna execute it better, is what I would say. One last one on Hawthorne. You've referred to New York a couple times. I mean, can you just help me understand if you're going to invest further into that, and why that? You say it could be the second biggest market, you know, in consumption. Some would say it already is the second biggest market in consumption, it's just illicit. How does that actually benefit you if, you know, if people, they still don't get supplied by Oklahoma and Michigan and California, and how does that actually change and become an opportunity over the next four or five years? Thanks. Wow. That's, you saved the biggest one for last, I think. I start by, you know, if people are gonna be selling out of their trunks of their cars or in bodegas, and the state's not gonna do anything to enforce, that's a big problem, and it's a big problem in Canada. You know, to take a business that is, you know, the size of the beer industry and have people making the stuff in their backyard and selling it out of the trunks of cars, it's not how the market should roll out. There's plenty of history, Colorado's a good example, of the market being rolled out in a sort of much more thoughtful way. I think you say it is a big market, and we believe that the, starting with the governor and the legislature, that they will be rational in allowing the people who spent the money or have gotten permits for on the social justice side that they can actually make money. I don't think that there's any, like, short or midterm requirement for capital in that business. I think that business is properly capitalized, and maybe one of the few permits in New York that is sitting on in excess of $100 million in cash. This business is capitalized, and giving up on it just, I don't know really what it accomplishes. You know, we don't own shares in RIV. We're, we're a creditor to RIV, and, we believe that that marketplace is right. I also wanna talk to our sort of partners, that are investors in RIV, that we don't view this as just a loan. We view this as this market matures and, you know, we've got very simple sort of rules internally on this conversion. I don't know if we've actually talked about it outside, which is that, the ability to normalize relationships with banks, meaning that plant-touching businesses can bank and U.S. exchanges, NASDAQ or NYSE, allow companies to list, that touch plants. These are really our conversion sort of parameters. It, it doesn't assume on legalization federally. It assumes kind of that we can bank and have a relationship with a public exchange. I don't think that's crazy, but I think what that tells people is we act like we're equity holders, but we're not. We're sort of creditors to that business, the only creditor and the most senior creditor. The business is capitalized. It is a monster market. We're not chasing multiple states down here. We basically said we want a big state. We kind of focused early on, you know, I think you guys knew this, New Jersey or New York, one of the big states in New York, we landed that license. It'd be very easy to say you overpaid for it. I think we probably would nod our head to that. That's where we are. The business is capitalized, and we're gonna see this through. We think ultimately it's worth doing. We're not required to put more money up, we're not chasing it to the extent where we don't think it's actually, they're actually moving, you know, ahead like we want. If the state of New York would actually Come out with their rules and listen to people, and try to give the, not just us, but the other MSOs, who've invested billions of dollars in their footprints in New York some advantage here, you know, for the amount of money that's been invested, that would be helpful. It's frustrating, but it's worth doing. I think every time we say to ourselves. Plus, we're in, so it's like there's nowhere for us to go. They're not in default. They've got the money to see this through, and we're gonna hang in there and be with them. Chris, anything you wanna add on this? Sure, yeah. I think you said most of it. But look, RIV, which, i t's a business that I pay a great deal of attention to, and I'm on the board of that company. RIV has one of, if not the strongest and most unique balance sheets in the cannabis industry. As Jim touched on, they don't need further investment, at least not for some time. New York, yeah, look, it's right now, I think anyone who walks down the street in Manhattan and steps into a corner bodega sees that there's a thriving illicit market there. That is not something we expect to persist over the course of many years. When the legal market there becomes the standard, which it will, we believe RIV Capital and Etain are positioned to be really just, I wouldn't say dominant in the state, but to take more than their fair share of the market, just because the resources they have at their disposal. It's something we remain really enthusiastic about. Has the last year had its discouraging moments? Of course, it has. Anyone who's been involved in the cannabis industry, I think, knows that and has experienced it. The commitment on our side, certainly on my side, remains pretty firm. I think the upside that we've seen, it's pushed out a little bit, but the end thesis is still in place. Great. Thank you. Thank you. Our next question comes from Gaurav Jain with Barclays. Your line is open. Hi. Good morning. I have a few questions. One is on the leverage of the company and the bonds. They are trading at $0.85 to the dollar. You can literally retire, like, $1.2 billion of debt with this $1 billion of free cash flow you will generate in the next two years and accelerate the deleverage. I understand you have restricted payment restrictions because of higher leverage, but, you know, is that an option you can look at? I think that you can buy about $25 million per quarter, you know, when it comes to these bonds, sort of buying it in the open market. Are those options you're looking at? Yeah. I think we have a number of opportunities to use the free cash flow that we're gonna generate to deleverage. You just named one of them. The practice of going through and determining what our highest cost debt is and what the opportunities are is what we go through. As free cash flow is generated, we'll direct it to the highest interest rates, pay that down. I will tell you that we do have a very nice maturity profile. We have a very good structure in place for how our debt is laid out, and the rates that we have on our bonds are very advantageous. The prioritization would more than likely be taking care of the Term Loan A, getting the revolver back down, and then looking at the bonds for potential opportunities to buy them. Sure. Then let's say over the next two years, you generated this, you know, $1 billion of free cash flow. EBITDA has improved because raw material prices have come off and leverage is closer to 4x. Then what happens? Like, will the excess free cash flow then start getting back invested again in cannabis ventures because you still believe in the long-term thesis? Well, thank you for the trap. No. I think what we've tried to convey to all of you in this conversation is a disciplined approach towards growth, whereby we are measuring every $1 and determining the potential payback and the returns that we expect to generate. As it comes to Hawthorne, RIV, those types of investments that we've made and the conversation that we just had with you heard Jim say non-cash. The cannabis industry, the companies that are involved in there are at very low valuations. There are opportunities, non-cash, to consolidate and provide a basis for value creation moving forward. The free cash flow prioritization that we talk about and that you're pointing to is, one, ensure that we are investing in the organic growth and capability of the company, those high return, short payback opportunities we have inside the company, doing that, making sure that we do that. That's $100 million of CapEx. We could probably spend $125 million-$150 million and continue to position this company for growth and free cash flow generation in those investments. Moving back down to four times leverage gives you the opportunity to start looking at the window for the balanced approach between continued debt paydown, M&A, and shareholder return activity. Remember, the history of this company in that three to four range is to pursue shareholder-friendly activities through share repurchases, one-time dividends, those types of things. That gives you the flexibility under four to begin to do those things again. A lot on the table as we generate free cash flow, de-leveraging over the next two years with the $1 billion that we're gonna generate, that's priority one. We'll take a look as we move below four at the more balanced approach. Sure. One last question, and I apologize if this has been answered already, but, you know, U.S. consumer pricing very strong. What is like the private label share right now? What are the price gaps? Is there anything that worries you? If you could just comment on that. We're not concerned about the price gaps right now. We're not seeing share change on private label in fact, we're picking up share. Consumers tend to prefer branded. That is not necessarily a concern. Let me just throw in my two cents on this. I do think that the price gap between private label and national brand, mostly us, did get larger than it was as. Remember, the contracts that the retailers had with us reprice once a year. I think that allowed, you know, I mean, I think we were losing money on a bunch of those private label deals. I think you'll see a correction in that. We took pretty significant pricing as much as we possibly could, and these are double-digit pricing that occurred. You know, we did not see share loss to private label last year in spite of that, you know, increased gap. I think you'll see that gap probably come down, but I think it's worth looking at, and we'll continue to talk to you guys about that as we look at sort of our pricing versus private label. I think low concern at this point and probably correcting from last year. Yeah, we're seeing it, seeing it correct. That's in the right direction, so. We do run price elasticity studies and all that with our retail partners to be sure that, I mean, I'm always more worried about category growth than I am share at this point. Sure. Thank you so much. Welcome. Thank you. Our next question comes from Carla Casella with JPMorgan. Your line is open. Hi. Somewhat on a little bit of the same lines with the getting to your four times leverage target by year-end, with a slight decline in EBITDA implies a big debt pay down. Can you just talk about what you're expecting from working capital, if you still see $400 million inventory release for the year and/or the timing of that? Sure. Just to make sure that's corrected, we said $1 billion of free cash flow generated over two years beginning last, I think, Q3. We also said under four by the end of 2024, so not by the end of this fiscal year. When you're talking through and taking a look at the working capital perspective, the inventory that we are looking to take out is $400 million. That will take place as we move through the year. Obviously, we're in a bit of a filled position right now. We've talked about the fact that retailer positions are down 5%-7% versus last year, and that our production is down year-over-year. We will be releasing that inventory that we have in place. That $400 million in inventory release is going to help generate a working capital benefit this year north of $200 million, right? We're gonna grow some sales, we're gonna have some AP that's gonna come through, and we're gonna pay. The net of all that on working capital is just north of $200 million. That leaves the cash from operations, excluding working capital, less CapEx, to generate the balance of our free cash flow this year and next year. As you look at it that way, you're kind of looking at north of $300 million in sort of non-working capital related free cash flow plus the working capital release. Okay, great. If I could just ask a follow on. You said you have strong liquidity with over $800 million available. Could you just talk about what your drawings were on the ABL versus the AR facility, and if that $800 million availability was the two facilities combined? No, the $800 million is sitting on our revolver. The ABL and the AR facility, we didn't change really over the from last quarter that much. I think they're kind of in the $400 million range. For the season. Yeah, for the season. Okay, great. Thank you so much. Thank you. Our next question comes from William Reuter with Bank of America. Your line is open. Good morning. Hey. In terms of your, I'm trying to think about elasticity. You said you guys have done some studies, and worked with your retail partners. I know that this varies by product, but is there any way for us to think about how much higher, your prices are this year versus last year? Yes. You know, what I would say is, you know, we took pricing, I don't know, August, I think. Right. which I think probably averaged 8 or something like that. I don't know what it was. I think that's probably what you'll see is, you know. That price will show up. Remember, we've got real mondo promotion early season, so you know, I think you'll probably see lower retail margins, in the early season, particularly on lawns, as we promote very heavily with the retailers. I think generally what you'd see is 5%-10% increase in retails compared to a year ago, something like that. That's what I would guess. Okay. I don't have the exact number on that. Yeah, I think. Remember, we sell, the retailers set their pricing. Yeah. They're gonna pass through some of that pricing, or all of it. You know, I think 5%-10% higher than last year is what you should expect to see. Yeah. I mean, I'm sitting across from Joanna of Medford, who's the CFO. Oh, there you go. You got it. You know, what, the way that she's characterized it previously is from a price elasticity perspective, part of the reason that we're pointing to POS flat in all categories, except for essentially, seed and ferts being up 10% is because of that price elasticity, right? Raising prices and some of that is, you know, offset coming in lower volumes. Net-net, that's what's driving the POS that way. Great. Just one follow-up. In some of the prepared commentary, you discussed that there is risk this year. You then immediately talked about consumer engagement, your lock-in prices on 70% of your products. Are there other major risks that I didn't mention there that you guys are thinking about for this year? No, I would say there's. You know, the big question always is the consumer. You know, maybe throw weather in that, 'cause I think that's probably the biggest single factor, you know, with the consumer. I think based on the economy, sort of the health of the consumer, that, you know, the work we've done on the first half, is the work that we all know about. We build work with our retailers, we ship it in, load the shelves, merchandise it. At the end of the day, it's gonna come down to the consumer showing up, and that, of course, is the risk that I think everybody in the consumer business is looking at. Again, I think we have a pretty conservative sales number of, you know, flat to kind of the world's crappiest year. Get back half of what we lost last year in lawns. We think that was mostly weather. I would say, Hawthorne, you know, just starting to make numbers is I would think those are the two risks, and we're covering a lot of that risk. When we say we can do better than $185 million- It's we've got room to cover, if we have to. I think on the positive side, which people are starting to feel a little bit positive, particularly on the consumer side, is how much of that money can they reinvest back into the consumer activation? Remember, it's already up, but I think Patti's expectation on the brand side is that if they overachieve early season, that there's more money to continue to push activation. I think the big risk is the consumer showing up in Hawthorne. Springboard savings are ahead of plan, and they will continue to be ahead of plan. That gives us room to sort of cover. You know, I think that's, that answers the question, I think. Perfect. That's all for me. Thank you. All right. Thank you. Thank you. That's all we have the time we have for questions. Thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day. Thank you all.