Benzinga | Aug 5, 2021 01:50PM EDT

Scotts Miracle-Gro Sees Record Q3: 48% YoY Increase To $422M, Will Acquire HydroLogic Purification Systems

Scotts Miracle-Gro (NYSE:SMG) reported on Wednesday that company-wide third-quarter sales grew by 8% year-over-year to $1.61 billion, driven mainly by Hawthorne growth of 48%.

Hawthorne segment sales amounted to $421.9 million, as the segment "saw growth in every product category and every major geographic market," Miracle-Gro's chairman and CEO Jim Hagedorn said Thursday.

Scotts Miracle-Gro, based in Marysville, Ohio, plans to strengthen the Hawthorne Gardening portfolio by acquiring HydroLogic Purification Systems, which will add roughly $20 million in annualized sales.

The U.S. Consumer segment sales dropped by 4% to $1.05 billion from $1.09 billion in the same quarter of last year.

"Our U.S. Consumer business continued to excel despite a modest decline in sales compared with last year's record levels," Hagedorn added.

Q3 2021 Financial Highlights

* The company-wide GAAP and non-GAAP adjusted gross margin rates were 30.7 % and 30.8%, respectively.

* SG&A plunged 18% year-over-year to $194.1 million.

* Interest expense rose by $1.6 million to $21.9 million.

* GAAP income from continuing operations totaled $229.8 million, or $4 per diluted share, versus $204.3 million, or $3.57 per diluted share, a year ago.

* Non-GAAP adjusted earnings, which exclude impairment, restructuring and other non-recurring items, amounted to $228.6 million or $3.98 per diluted share.

Year-To-Date Financial Highlights

* Company-wide sales for the first nine months spiked 29% year-over-year to $4.19 billion.

* The U.S. Consumer segment saw a 19% year-over-year increase to $2.83 billion. Hawthorne sales grew by 60% to $1.10 billion.

* The GAAP gross margin rate on a year-to-date basis was 32.1%. The non-GAAP adjusted rate was 32.6%.

* Interest expense declined by $5.7 million compared to the same period in 2020, to $57.3 million.

* GAAP income from continuing operations totaled $566 million, or $9.90 per diluted share.

* Non-GAAP adjusted earnings, which exclude impairment, restructuring and other non-recurring items, totaled $573.1 million, or $10.04 per share.

2021 FY Guidance

The company reaffirmed its full-year guidance for the U.S. expecting an increase in sales of between 17% and 19%.

The U.S. Consumer segment is expected to grow 7% to 9% in fiscal 2021; Hawthorne sales are expected to increase 40% to 45%.

While guidance for non-GAAP adjusted earnings per share was also reaffirmed in a range of $9 to $9.30, the gross margin rate is expected to drop 250 to 275 basis points.

Price Action

Scotts Miracle-Gro's shares were trading 0.83% lower at $163.19 per share at the time of writing Thursday early afternoon.

Photo: Courtesy of Ryan Lange on Unsplash