Good morning. Welcome to Scotts Miracle-Gro's Third Quarter 2025 Earnings Webcast. I'm Brad Chelton, Head of Investor Relations. Speaking today are Chairman and CEO, Jim Hagedorn; and Chief Financial Officer and Chief Accounting Officer, Mark Scheiwer. Jim will provide a business update, followed by Mark with a review of our financial results. In conjunction with our commentary today, please review our earnings release and supplemental financial presentation slides, which were published on our website at investor.scotts.com prior to this webcast. During our review, we will make forward-looking statements and discuss certain non-GAAP financial measures. Please be aware that our actual results could differ materially from what we share today. Please refer to our Form 10-K filed with the SEC for details of the full range of risk factors that could impact our results. Following the webcast, President and Chief Operating Officer, Nate Baxter; and Executive Vice President and Chief of Staff, Chris Hagedorn, will join Jim and Mark for an audio-only Q&A session. To listen to the Q&A, simply remain on this webcast. To participate, please join by the audio link shared in our press release. As always, today's session will be recorded. An archived version will be published on our website. For further discussion after the call, please e-mail or call me directly. With that, let's get started with Jim's business update.

Thanks, Brad, and good morning, everyone. Today, I'm going to focus on 2 big topics. The first is our performance. We're delivering on all our key financial metrics. We've also gained another 2% of market share on top of last year's share gains. What's even more impressive is POS units across our categories are up 8% on the year. They're keeping pace with fiscal '24 trend that saw us drive 9% gains last year. It's clear our marketing and activation programs are working and our consumer is highly engaged. The year is playing out the way we had hoped, even though weather was not particularly great in the early season. The second thing I'll cover is our transformation and where we're headed. For most of the past 2 years, we've been focusing on internal initiatives to get our cost structure right, achieve efficiencies and reorganize around our superpowers, our brands, supply chain, sales force and R&D. We put completely new teams in place to lead many facets of our business from marketing and sales to supply chain, and we've made a ton of progress. We've improved our balance sheet, gotten our leverage to a more normal level, increased profitability and given ourselves greater flexibility to reinvest in those superpowers. We continue to adopt technology to drive further productivity and efficiency improvements well into the future. The next thing in our transformation checklist is a shift to outward-facing initiatives involving our brands and our relationships with our consumers. We have the most powerful franchise in lawn and garden, and we're going to make it even better. We're deploying more resources and injecting new thinking into our approaches to marketing, messaging, channel expansion and innovation. We'll connect with consumers differently, communicate with them differently and advertise differently. All this transformation work, both…

Thanks, Jim, and hello, everyone. As you just heard, we're in the middle of a radical transformation of our lawns business and the early success we are seeing this year is just the first step in remaking of our turf builder portfolio. Now I don't use the word transformation lightly when it comes to what we're doing on lawns. We have hit the reset button, challenging every aspect of this business and our conventional way of thinking. Now I could tell you this has been an all-hands-on-deck effort and the result is going to be an entirely new product line, laser-focused on the needs for the next generation of consumers. Simply put, consumers want to have a great lawn they can enjoy with their family and pets, and that's what we're going to give them. So what are we doing? Well, I'll boil it down to these three major work streams. First, a completely revamped product line. This new lineup will have new enhanced formulas that perform better and will give consumers an incredible result. We're standardizing the sizes and we're going to roll out a fresh new packaging design as well. But here's the best part, lower retail price points. Our supply chain is the best in the business and their efforts have enabled us to build an entirely new pricing structure that's going to be hard for others to match. With a new product lineup like that, it requires an entirely new media and advertising strategy which is our second major work stream. You see having a great lawn is easy as long as you feed on a regular basis. Our shift in media will evolve and expand beyond just a heavy spring campaign. You're going to start to hear and see our messages pulsing throughout the entire year, reminding consumers when it's time to feed. We will continue with our Citizens of the Lawn campaign, highlighting the lawn enjoyment and the fact that it is safe to use our products around kids and pets. And thirdly, as we get consumers excited about the category, we're working closely with our retail partners to build promotional programs that incentivize consumers for multiple feedings. So as you can see, we are transforming this entire business and we're excited about where we're taking this category. This approach will give consumers an incredible lawn, one that they can feel just as good about what they're putting on it as they do playing on it.

Thanks, John. The performance of our lawns business is very important to the SMG P&L and our overall financial health. John and the team have made tremendous progress and I'm really comfortable where they're taking us. I want to go back and emphasize something for our retailers. Our partnerships are essential to both our success and their success. While we will expand our channels and marketing approaches, we view our retail activation programs as powerful tools in driving consumer takeaway. Retailers who leaned in with us this year took market share and grew their lawn and garden business by double digits. Those who didn't go all in did not see the same level of growth. It's a winning formula and it has to be a team effort. We'll continue to fund future investments in retailer activations, which exceed our advertising spend, as long as the participating retailers help drive our POS. Shifting to Hawthorne. Divesting this business is transformation too. We'll continue to work toward a solution and I expect to make progress on this front by the close of Q4. As I stated before, the divestiture would put us where we need to be. The consumer lawn and garden leader with consistent earnings, less share price volatility and enhanced ability to invest in growth. In the meantime, Hawthorne continues to do the right things to move the business forward. They've now delivered 3 straight quarters of profitability. When you're looking at what we're doing across our business, we're building a world-class consumer goods company with financials to match. This includes delivering greater shareholder returns and achieving these 3 high-level targets we've established to start the year. Annual sustained U.S. consumer sales growth of at least 3%. A gross margin rate of 35% or higher and EBITDA gains in the mid- to high- single-digit percentages. That leads me to fiscal '26. Our plans are coming together and as usual, we'll tell you more about that in our Q4 call. It is our intent to take pricing next year and these discussions are happening now with our retailers. We've held the line on pricing the past few years while our costs, like everyone else's, have risen. Pricing helps us drive the business and is not purely about making more money. It will give us more resources to invest in innovation and activation too. I'll close with this. We're doing exactly what we said we would do. We've improved our financials and strengthened our balance sheet. We're investing in our superpowers and the fundamentals that make our consumer franchise unique, and we're making all the right moves that will result in a premium valuation of our equity. I appreciate the work of our leadership team and our associates and the support and guidance of our Board of Directors. I also want to thank our banks and our retailers for their partnership. As always, I appreciate our shareholders for being part of our company. Thank you.

Thank you, Jim, and hello, everyone. We delivered a strong quarter, continuing the momentum we've built through the year. Jim discussed the substantial progress we've made on the financial metrics that are foundational to our fiscal '25 plan. When you look at our performance, we are well positioned to deliver on the fiscal '25 guidance for U.S. consumer sales, gross margin, EBITDA, EPS, free cash flow and leverage. We have momentum, and you can expect us to drive continued improvements in our financial performance through fiscal year-end and well into the future as we increase confidence in our growth plans. With this background, I'll review the financial details. The overarching story is the power and health of our U.S. consumer business. For the quarter, U.S. consumer net sales were $1.03 billion versus $1.02 billion last year, an increase of 1%. When you exclude the nonrecurring AeroGarden and bulk raw material sales from fiscal '24, U.S. consumer sales increased 2% over the prior year quarter. Year-to-date, through our third quarter, U.S. consumer net sales were $2.68 billion, down 1% versus $2.7 billion in the corresponding period last year. However, when you exclude the nonrecurring sales I just mentioned, U.S. consumer sales increased 1% over prior year. These gains were driven by organic volume growth along with continued strong performance of new products such as the expanded Miracle-Gro Organics line that were initially listed in fiscal '24. At the start of the year, Jim outlined his priorities for our business that included driving sustained average annual sales growth of 3%. When looking at our combined sales growth over fiscal '24 and '25 for U.S. consumer, we are on pace to deliver on this target. U.S. consumer sales for both the quarter and the year are tracking to the guidance we provided for…

All right, guys. Jim Hagedorn here. I'm going to just rant a little bit, not for kind of any reason except I want to look back at the last quarterly call we had where the shares I think went down about 15%. So we had a great result. I think I'm so proud of the company with what we're doing and the progress we've made that you're seeing today. But it was the same in the last quarter call and there were like nonsense headlines that came out that we pulled guidance, that we didn't make our numbers and the stock reacted to that. The next day, it went up 15% back to where it was, about 1/3 of our shares traded, and I have not been able to get the SEC or the New York Stock Exchange to show any interest in compliance against who is behind that. And I don't think it's orderly and I don't think it's right for the New York Stock Exchange or the U.S. public markets to sort of allow that kind of stuff. The -- I'm really talking to Cleveland Research here where I view Eric as one of the best analysts traditionally in our space. But if I look at sort of what he's saying about private label, we are not losing share. As long as I've been the CEO guys, we have been reducing the share of private label and gaining share in our marketplace. And so this sort of nonsense about private label, I think there is a retailer out there that is playing with private label. I'm not going to name them mostly because they're friends of mine. But I can tell you it doesn't work. The news about being sort of my age and having been in this…

Yes. I mean I'll just echo Jim. I think it certainly is frustrating. I'm really pleased with our performance and more importantly, I'm pleased with the partnership we've got with our retailers. I think given the macroeconomic backdrop of the last 2 years to see both the lawn and garden category grow as well as our share gains, I think it says a lot. And I think, for me, the last 2 quarters have been a success story. And I think from an investor standpoint, we'll continue to build on that and deliver just like Mark said in his prepared remarks. So from my perspective, I think we've got momentum behind us, and I think we've got retail partners that are leaning in. To Jim's point, we all recognize e-commerce is an important part of the business. By the way, the biggest growth we saw this last quarter has been with our biggest retail partners. And I'll speak personally, I had mulch delivered by pallet through one of our retail partners. It was cheaper and faster to get it than it was in bulk. And I think once we get that message out there with consumers and maybe even some of the small to medium-sized professional outfits, there is real opportunity for us. So again, we talk about household penetration, lawns, it's low. We've got a lot of organic growth, not only for us as a company, but in the industry. And I'm really bullish on where we're headed. So again, it's frustrating to see those headlines when we know we've got opportunities and given where we are macroeconomically to deliver the performance we've been delivering.

All right. Victor, we'll turn it over to you to run the Q&A, please.

[Operator Instructions] Our first question will come from the line of Eric Bosshard from Cleveland Research Company.

Two questions. First of all, I'm curious on price and price mix in '25, how that has performed relative to your expectations and what the strategy is for '26 and the expectations in '26.

Eric, this is Nate. Yes, listen, for '25, like we've said previously, we took net, call it, just under 1.5% pricing. We invested almost all of that back into the business, mostly through activation with retail partners. So I think for '26, as Jim said, we're still looking to go after pricing just because we have commodities and other things that we need to take into account. It's a little early for me to say our strategy on how we'll reinvest those dollars, but we will. I don't know if we'll reinvest all of them because we're definitely looking to grow top line. But look, my view is this. I'm not going to spend any less on activation with retail partners. I think at this point in the season, the only question is, who am I spending it with and what programs am I spending it on? It worked for us significantly to our benefits this past year, and we'll figure out a way to do it for next year. Mark, any thoughts?

Eric, this is Mark Scheiwer. Just as it relates to our expectations going into the year, we were expecting a difference between unit and dollar growth from POS. Mix being a big piece of it and then I think I've said in the past about 2/3 of it and 1/3 price. Those have held in line with our expectations. And the only thing I'll call out versus some of the remarks at the beginning, we've had some great innovation this past year and past 2 years on Miracle-Gro Organics, which has helped with our volume and a lot of our great activity in unit volume growth. So from an expectation standpoint, we -- it was in line from a sales guidance. And then as we look to next year, we're still in the early planning phases, but as that business like soils and mulch continue to grow and do well, there might be a continued disconnect, but we'll see. We'll give you guidance in Q4.

Great. And then secondly, in the neighborhood of Jim's comments, the comment about the category growth and you gaining share this year, what do you think the category growth is at retail in '25? And what have your numbers do you compare to that?

Yes. So Eric, our calculus using our external sources as we see the year-to-date market for lawn and garden has grown about 5 points and we've gained about 2 points of that share.

And so within that, is this dollars or units? I'm sorry.

Dollars.

Our next question comes from the line of Jon Anderson from William Blair.

Thank you for the questions. Two questions. First is, you commented about the performance of some of the customers that leaned in with you on your traffic driving strategy this year and their relative outperformance. Could you talk about how that is influencing your 2026 line reviews? Specifically, those retailers planning to kind of re-up and lean in again with you and maybe those customers that didn't to the same extent rethinking that given their relative underperformance. And then the second question is on margins, great gross margin improvement last year, looks like you set up for another significant improvement this year. If you get to 30% and then you have kind of the target in the mid-30s, can you talk a little bit about your visibility to getting to mid-30s over the next couple few years? And what the cadence of that might look like '26 versus '27?

Jon, Hagedorn here. I'm going to sort of take the first part on kind of programs and activation dollars. Remember, we talked about this, which was coming out of kind of our s*** show. We used discounting pretty heavily and as things turned around, we wanted that money back. Retailers basically said, look, man, customer counts down, our margins are down. We'd like to keep that money. And we decided to put that money to work saying, you know what? And when you look at a lot of our retailers, most of our retailers, they're spending more than that pushing our products and pushing lawn and garden. So we basically said, look, if you use that money for our benefit and your benefit together, we'll do that. I'm trying to, in my head, figure out kind of what that's worth, but I'm going to say that's probably worth at least 5%. And Nate made a comment, which is we're not reducing our spend. We're not looking to bring that back. We can make our margin numbers without that. And the work that's happening in the supply chain and on the sort of operating units is really, really good at that. But what he did say is we're going to spend more doing that with people who are using that money. And people who are not going to be part of that program are not going to have access to that money. And I think that for people who are listening, you know who you are. And I don't think we want to go down that path. So we're looking to spend that money, it definitely works, and we saw it this year and we saw it last year. So the question is on the fact that this program dollars.

Yes. And I guess I would say, Jon, it's a little early for us to project. We're in the middle of those discussions with retailers. So whether those programs look the same and each retailer takes the same approach or not is still a TBD and we'll add more color to that next quarter. Hey, I do want to correct myself. I said -- I told Eric, dollars. I really meant units when we talked about the market share. So just I want to stand corrected on that.

Jon, just a follow-up, this is Mark Scheiwer, just following up on your comment on gross margin and the phasing. So what you saw year-to-date has been outstanding performance by our supply chain team and the organization broadly. So we've been able to overdeliver year-to-date on our gross margin, including those $75 million of savings. We've overperformed year-to-date, we've realized those and we've got good line of sight for the balance of this year. As I look to next year in '26 and '27, the team's already been doing a lot of planning around this. And in the walk generally from 30 to 35 is going to include about a point -- I call it about a point of 1% benefit, gross margin benefit or 100 basis points from supply chain savings, and then about 100 basis points from net pricing, net of any kind of commodity inflation. So those are kind of the key step ups as we go from here. And I would say that the team on the sales side is working hard on those pricing and programs, and we'll provide you more color at year-end. I can definitely tell you as well, the supply chain team, we have a long history and track record of delivering at least 1% of cost out in our business. And I've been already seeing the laddering up of projects. The team's doing a great job. It will be a little bit phased. Like I said, 1%, 1% is generally the nerdy accounting in me, it's phased, but the team's got to execute on CapEx projects. We've got a lot of great CapEx projects we're working on that we spoke in our prepared remarks around automation activities that are going to deliver a lot of those future savings. So it will be kind of a staggered measured approach.

And I would just add innovation. I think John Sass talked about it in the introductory remarks. As we really go to full launch of the new fertilizer program in '27, that innovation will bring margin accretion with it as well.

Look, I also think that there's a lot of enthusiasm at retail on lawn and garden. You look at our unit volume increase over 2 years, that's 17%. So I think there's a lot of enthusiasm and I don't want anybody to get the idea that there's any trouble kind of in paradise. It's a really good category. It's growing really well. Retailers are highly enthusiastic. And I'm not really hearing any sort of pullback from their sort of outlook, which is positive for lawn and garden.

Our next question will come from the line of Chris Carey from Wells Fargo Securities.

Just regarding -- like more of a mixed question, and this is really more strategic longer term, can you just give maybe a state of the union on how you feel about the lawns business, delivery versus expectations this year and really how it forms your thought process over the next 1 to 2 years as you look to perhaps improve the mix between some of the growing media and mulch businesses relative to lawns over the medium-term horizon.

Yes, I'll start because I am really pleased with where the lawns business is. They had originally come in, I think, with like a minus 5%, I think, with the number of places or something. This is one of those meetings where I said, just get out of my office right now and rethink your words here carefully. And John and his team, with a lot of support from Nate, have done really well. We called the Midwest numbers out because of the 2 big regions in the Northeast and Midwest, the Midwest had the most normal weather. So I don't know what those numbers were, they were like plus 15 or something like that, which I think is way above. If you look at -- the Northeast was just really late and Texas really never came to fire, and they still held the line. They were still positive. They had a huge increase in crabgrass control products. So that halts business, that is no joke to be up, I think, it was 25%. I'm just looking at people giving me the thumbs up. To be up 25%, it doesn't just do good for multi-bag. There's always a lot of reserves when we do it because a lot of retailers have return rights on that product because it's kind of a short season. So basically we sold everything that was in the street. And so I'm going to say that you might look and say plus 1 or whatever we said across the line and say, well, that doesn't look that great compared to where they showed up, compared to the sort of regional weather effects and sort of picking and saying, did it work? And it's advertising, it's really early days with this multistep, but there's a lot of…

Yes, I'll just -- listen, Chris, I'll just add just back to your question on lawns. You're focused on the right thing and we talked about this at the last earnings call. We have so much potential. Remember, our household penetration there is about 11%, 12%. So if you just look at a combination of focusing on frequency, which John talked about, and household penetration increase, there's a lot of organic growth that's possible there. So what Jim talked about in his opening remarks, addressing the consumer in a different way, making sure we have solutions, whether they're time constrained or budget constrained, you'll start to see that. Now the challenge is, we have a transition that will be coming in '26, '27 with this product, so we've got to work with retailers on that. But you get through that transition, we're going to be competitive to a point where I don't think there'll be a distant second.

And Chris, this is Mark Scheiwer, just on some of the modeling related to mix. So this fiscal year, year-to-date, we actually have had positive results from mix, not only because Hawthorne mix is obviously lower, but we saw some good momentum and movement within our U.S. consumer business. The quality of the earnings related to the mix of our products has really improved. And as I look out over the next couple of years, the innovation that's coming and the activities we're doing in the lawns category, I view them to be margin accretive, but I'm not even factoring them into my -- as I consider my walk to 35 or mid-30s, I'm more focused on cost savings, things we can control like that and then the pricing activities. But mix, definitely, as we see the lawns business continue to grow and perform and get those higher frequencies, that is a very high-margin business that should help us in the future.

Our next question will come from the line of Joe Altobello from Raymond James.

This is Martin on for Joe. Earlier, you had mentioned that many of the retailers have shifted their replenishment to match the POS curve. Would you mind giving a little bit more detail as to what's going on there? And sort of what's the shape of the retail inventories?

Sure. Look, I think if you go back to pandemic and the peak when all of our patterns got completely sideways, we were at peak sort of 60-40 in terms of first half, second half load in. Prior to the pandemic, we were roughly 50-50, plus or minus a point, I think, year- over-year. So what we're seeing now is this natural trend back towards the 50-50. By the way, we're supportive of it. I don't worry too much about retailer inventories. We definitely lean in with retailers as they want to make those adjustments. And I -- by the way, from my point of view, it helps our supply chain. We're probably the only supply chain that can deliver almost just in time. So from my perspective, it actually helps and I can level load production more. And I think each retailer is in a different place. A couple of our retailers this year have been more aggressive on that. And I think that's good and I suspect we'll see more of that as we sort of get back to, call it, 50-50. I don't know, Mark, you want to…

And then just to follow up, Martin, Mark Scheiwer again. As far as the going into the year, retailer inventories, we did expect to have an impact from a retailer activity just being down a little bit as far as inventories go. So we had planned that into our sales guide. So that has kind of has shown up as we've navigated. And as I look to next year, as Nate spoke, as that first half, second half dynamic changes, you would expect probably some shifting mostly between Q2 and Q3 less to do about like a year-end long term. It's more of a shifting between Q2 into Q3.

But I think what we're seeing and people were correcting me this morning as we were talking about it, I think is excluding commodity, retail inventory is about -- down about 10%. Is that…

Down about 4, yes, if you take out mulch. So I think they're healthy. It depends on the retailer. But again, this -- I think shifting quarter-to-quarter doesn't bother me. What I really look at is the underlying consumer health. And if you just look at those POS gains, last year, where we are this year, 8% year-to-date. The consumer is healthy, so adjusting inventory buys to be closer to the curve, I think it's just -- it's where we're headed as an industry and we're totally fine with that.

Our next question will come from the line of Peter Grom from UBS.

Mark, I just want to ask a follow-up question on gross margin. It's more of a clarification. So just 100 basis points of cost savings, 100 basis points on price tests for each year and for both drivers. So I guess, all else equal, that bridge would assume kind of going from 30% in fiscal '25 to 32% in fiscal '26 and then building from there. And if something happens with Hawthorne, you could see another, call it, 100 basis points on. Is that the right way to think about it? I just wanted to clarify that.

Yes, so that would be how the simple math works, Peter. I would just tell you, year-to-date, we're overperforming from a supply chain perspective. So I feel confident when I say the 30, could we be above that? Absolutely. And so that's -- as we kind of keep working on these additional supply chain savings projects and work through our pricing activities, those will also be a little bit of a tailwind as we navigate up to 35.

By the way, we should be pretty close to that next year, I think.

Yes, it'll be not 35, but yes, we'll definitely make progress and we'll be on a good trajectory, absolutely.

Okay, that's really helpful. And I guess just -- to the prior question, right, I think in your response to Chris' question, you kind of mentioned that you weren't really including benefits from mix and innovation in this bridge. So are there any guardrails you can provide in terms of what that benefit could look like? And is this something that actually could start to show its teeth in kind of the P&L next year? Or is that kind of more of a multiyear process?

Peter, this is Mark Scheiwer. At least for me, from a financial modeling, I would view it more as a multiyear process. The team has done a great job, coming out of COVID, firing up our innovation funnel again, and so we're doing some cool things there. And you notice in the retail space, as we roll those programs out and build out the advertising, it'll be a multiyear approach as we kind of navigate that.

Yes. I guess I'll just say that a different way. I think, again, we had a very cost out focus, call it, 3, 4 years ago. We've shifted. It takes a little bit of time to get that spun back up, but I think MGO is a great story. We've got new innovation…

I don’t know what that means.

Sorry, Miracle-Gro Organics. That organics line went from nothing to $100 million in 2 years. So it's, from our perspective, been a success story. I would say we're biased towards more innovation coming out in '27. But here's a difference, Peter, and you saw it with the mosquito product that was featured on the prepared remarks or the prepared video. We're going to -- as innovation becomes available, we're going to introduce it through digital channels. We're not going to wait for sort of traditional seasonal with the retailers. And by the way, we're not leaving them out of this. We'll do it through their digital channels as well. So you're going to see us turn on to more of a 365. When we have something ready to go to the market, we're going to take it to market and we'll do it in a way where we're targeting consumers. And I think it takes a little bit of -- when you think about weather in the spring and you think about people going to a garden center or a retailer on a nice sunny day, I think what some of our retailers are seeing is people on e-comm, they'll order it on a rainy day and they'll wait until the next nice day to apply. So I do think we've got sort of cultural shifts that will favor us as we work with our retail partners to sort of figure out how to address consumers wherever they are, as Jim said.

Look, and I think one of the things that we haven’t talked about is, Bonnie has done really well this year. So I think continued progress there and Hawthorne also helping out. So not being a drag.

Yes, that makes sense, Jim. I guess one last question for me, then I'll pass it on. Just Jim, taking all the comments you’ve made are just around the top line, the category, the retail activation, the innovation. Clearly just a lot of momentum, a lot of enthusiasm. And I know your comment in the prepared remarks around the long-term algorithm for certain components of the multiyear target. But as you look out to next year, is there any sort of reason why the U.S. consumer business wouldn't see that 3% level of growth that you kind of outlined previously?

The answer is no. Here's our issue. I'm looking in, this has been up probably 6 months on my big whiteboard in my office, which is kind of, what I'm trying to get everybody head around is 2% unit volume, sort of 1% pricing. I'm talking not next year, I'm talking kind of long-term 1% cost out. I think those are safe numbers. The issue is if all the stuff we're doing, I would -- if I was any of the people running businesses, those are embarrassingly low numbers based on, I think, what we know we can do. So I think the challenge is, if you look at just marketing money, that Nate wants, that was probably 150 this year or something like that, which is big increase from last year. I think what Nate's going to show up tomorrow and Friday is say I want 300. So the question is, and I know this is a lot of pressure on Mark, is he wants to be safe, okay? And I totally get it. So -- but it is the kind of square corner we're going to run into where we don't want to tell you guys numbers that we can't make. I think that's a bad day. But we think we can do more, but Nate wants a lot more investment in the business. And I think the brand teams, I think need that money. They want that money. They can put that money to use. And that's a little bit the sort of challenge in the budgeting for multiyear budgeting that we're kind of running into is if we use a low enough number, it's not going to justify the investment that Nate's going to want to make in this business. And it's not just in sort of marketing. I think it's innovation. There's a lot of places where Baxter wants to put money, and I know Mark and I want to give it to him. We're providing that guardrail that you guys were talking about as far as limiting top line growth to a number that we believe is achievable kind of all day long. And that's the difference. I think that the natural growth rate of this business should be higher than sort of 2% unit volume growth. And we've seen that. So it's -- we just have to figure out how to budget through it because I think what's important is for Nate, to make numbers that are higher, he needs the investment that's higher. We want to give it to him, but Mark and I are trying to be safe on sort of what we tell you guys.

I think this year stands as a proof point. We made significant incremental investments in the brands, in the business and we're on track to deliver for guidance.

Peter, again, Mark Scheiwer. So as our margins continue to improve and what you saw this year, we'll continue to invest in the business from that standpoint and those would be sales volume driving activities, whether it be incremental advertising or investments from an IT perspective, e-comm, things like that. So it kind of becomes circular, but we're making great progress on the gross margin activities. And I think those will help fuel growth, and we'll give you sales guidance in Q4.

Yes, we'll do it in a measured and responsible way.

I don't know. I personally very much believe in where Nate and his crew are going. I want to invest hard behind it. And I also understand the need to sort of safety in our outlook with The Street that overpromising and underdelivering where we still produce a great number of people say, well, it's less than you said. And we do have to figure it out. We were going through just headcount here because we're getting ready for a Board meeting. We're talking about this issue of transformation or call it, dude, this company from a headcount point of view is a lot lower. I don't know what our cuts have been. I think we said just $400 million in cuts, $100 million investment. That's what we said kind of last year. I think Nate's pulled out probably another $100 million, if not more. And...

But I would distinguish just one important point, which is springboard work cuts, but what we've done, call it, over the last 12 to 18 months has been just strategic transformation, just eliminating workflows that don't need to be eliminated, automating things. It's yes, there's a net result in terms of cost. But from my perspective, the long-term health of the business, it's about efficiency and it's about doing more with less and leveraging the technology around us. I mean that's the real story there.

Our next question will come from the line of Andres Padilla from Jefferies. All right. And that actually concludes our question-and-answer session for today. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.