CENT

• Core Operational Improvements

  • Project Horizon, the multi-year program to modernize the garden logistics network, is ~95% complete. 13 legacy facilities have been closed to create a unified 4-node national Central Logistics Network, with all projects delivered on schedule and under budget with minimal customer disruption.
  • The unified network has already shipped over 1 million small parcel packages, with utilization driving meaningful improvements in productivity, service levels, and customer responsiveness. Cross-segment integration of pet and garden logistics is already underway, with 10x more pet volume moving through the network year-over-year.
  • Cost efficiency and operational simplification are now embedded in the company culture, with most large-scale restructuring complete, and future improvements focused on technology integration (AI, robotics) and acquired business integration.

• Acquisition Update

  • The company entered a definitive agreement to acquire an 80% stake in Trixie, a leading European pet supplies and pet snacks company, for a total maximum consideration of €400 million (including an earn-out). The transaction is expected to close in the first half of fiscal 2027.
  • Trixie has a 90% branded product portfolio, serves over 30,000 retail locations globally, and has a track record of profitable growth and strong in-house innovation (launching hundreds of new products annually). The acquisition creates a leading global pet platform, expands Central's international footprint to ~10% of combined sales outside the U.S., and positions the company to participate in the fragmented and growing European pet specialty market.
  • Identified near-term synergies include shared manufacturing capacity, expanded innovation collaboration, improved sourcing efficiency, and operational knowledge sharing from Trixie's highly automated logistics facility. Synergies are expected to begin materializing in the second full year post-close.

• Innovation and Market Position

  • Recent product launches across both segments performed well during the quarter, including Nylabone Dog Shoes with real meat, Farnam's Endure Gold Fly Killer, Rebel Sun & Shade Extension grass seed, and multiple private label lines.
  • The company gained market share in key pet categories (professional, dog treats, rawhide, flea and tick) and held overall market share in pet. It gained market share across key garden categories (fertilizer, wild bird, grass seed).
  • The company is seeing consumer demand focused on value, with strong performance from correctly positioned value products (e.g., Rebel grass seed, Bully Hide chews) and growing channel shift to club and mass retailers like Costco and Walmart, where Central holds strong positions.

• Financial Position

  • Consolidated net sales declined 8% to $882 million, while organic net sales (exiting pet distribution) grew 2% to $862 million. Non-GAAP operating margin expanded 90 basis points to 15.4%, and adjusted EBITDA margin expanded 100 basis points to 18.3%.
  • Quarterly operating cash flow hit a company record of $327 million, up from $265 million year-over-year. Cash and cash equivalents ended the quarter at $997 million, an all-time high, with 14 consecutive quarters of year-over-year cash growth.
  • Gross leverage is 2.8x, below the company's 3-3.5x target, and net leverage is 0.5x, an all-time low. Full-year fiscal 2026 capex is planned at ~$50 million, mostly for maintenance and targeted productivity/growth investments.

• The company raised its fiscal 2026 non-GAAP diluted EPS guidance from 270 or better to 285 or better. This upward revision reflects year-to-date performance progress and management confidence in remaining quarter execution.
• The guidance excludes impacts from future acquisitions (including Trixie), future divestitures, restructuring actions, and any additional tariff refunds.
• The exit of the pet distribution business will continue to reduce reported consolidated revenue over the next several quarters, with minimal earnings impact due to the business's low margin profile. The Trixie acquisition will offset a portion of this revenue decline after closing and improve the company's overall business mix.
• Long-term target organic growth rates are 1-4% for the pet segment and 1-2% for the garden segment, with additional upside from M&A.

1. Pet Segment: Net sales were $400 million, down 19% year-over-year due to the exit of the lower-margin pet distribution business. Organic net sales (exiting the distribution business) rose 2% to $380 million, contributing 45.3% of total company net sales. Online sales grew 10% year-over-year, and the professional pet vertical delivered another quarter of record performance. Segment non-GAAP operating income was $76 million, down 2% year-over-year, with operating margin expanding 320 basis points to 19%. Segment adjusted EBITDA was $86 million, down from $88 million year-over-year, with adjusted EBITDA margin expanding to 21.4% from 17.9%.
2. Garden Segment: Net sales were $482 million, up 3% year-over-year, contributing 54.7% of total company net sales. Growth was driven by distribution wins and strong consumer demand across fertilizer, wild bird, and grass seed, with fertilizer and wild bird hitting record annual sales. E-commerce sales grew over 40% year-over-year, and the segment gained overall market share during the year. Segment non-GAAP operating income was $91 million, up 7% year-over-year, with operating margin improving 70 basis points to 18.9%. Segment adjusted EBITDA was $101 million, up from $96 million year-over-year, with adjusted EBITDA margin expanding to 20.9% from 20.4%.

• The macroeconomic environment remains dynamic, with consumers facing continued cost pressures that drive demand for value-focused products.
• Unfavorable weather (e.g., extended cold/wet conditions, heat domes, wildfire smoke) can impact garden category seasonal performance, though the company's diversified portfolio and operational flexibility have mitigated impacts to date.
• Integration of the Trixie acquisition requires thoughtful execution to avoid disrupting Trixie's existing strong business, though cultural alignment is high and Trixie will operate with a separate integration work stream.
• Supply chain disruptions (such as the Q3 South American manufacturing facility fire that impacted dog and cat supply and margins) can create temporary, one-time hits to top-line and margin performance.

Q: What are the underlying current trends in the pet segment, following recent portfolio exits and adjustments? / A: Management reports broad stabilization in pet after post-COVID hangover, with overall market share maintained and share gains in key high-margin categories including professional, dog treats, rawhide, and flea and tick. A small Q3 dog and cat sales decline was driven by two one-off factors: temporary supply disruption from a burned South American manufacturing facility, and normal promotional timing differences, with ~two-thirds of the decline tied to timing. Portfolio simplification from exiting low-margin distribution businesses allows greater focus on higher-margin core growth lines. The pro, equine, and small animal verticals all delivered strong Q3 performance, with encouraging July results pointing to a quick rebound from temporary headwinds.

Q: What is the outlook for organic growth and margin expansion, and what synergies are expected from the Trixie acquisition beyond top-line growth? / A: Management expects to return to long-term target organic growth rates of 1-4% for pet and 1-2% for garden, with additional upside from M&A. Key identified Trixie synergies include margin expansion from shifting production of Trixie's dog and cat products to Central's manufacturing facilities, combined innovation from both companies' strong R&D teams, improved global sourcing efficiency, and operational knowledge sharing from Trixie's highly automated European logistics facility. Synergies are not expected to materialize meaningfully in the first year post-close, with benefits starting in the second year as integration plans are finalized.

Q: How are consumers behaving around value and private label trade-down, specifically in the pet segment? / A: Management notes consumers are more discerning and focused on finding the right value equation, rather than broad-based trade-down to lower-price private label across all categories. In Q3, Central's branded pet business outperformed private label, as the company's portfolio is largely positioned in the good/better price tier that aligns with current consumer demand. The channel shift to club and mass retailers (Costco, Walmart) has accelerated, and Central holds strong positions in these channels. In garden, private label has seen increased demand in categories like fertilizer (which typically has a two-brand national/private label structure), while value combination products from Central's branded portfolio also perform well.

Q: What is the outlook for additional M&A after the Trixie acquisition, and will integration require pausing new deal activity? / A: Management reports the M&A pipeline has grown with higher quality deals and more realistic valuation expectations from sellers, and the Trixie acquisition will not pause pursuit of new opportunities. Even after funding Trixie, the company's strong balance sheet and high cash position provide meaningful flexibility for additional deals. Europe is a particularly attractive market for additional pet-focused M&A, with generally lower valuation multiples than the U.S. and a fragmented market primed for consolidation. Management has sufficient bandwidth, with Trixie integration run as a separate work stream, and is actively progressing discussions on additional potential deals currently.