Snap One Holdings Corp.

Good day, and thank you for standing by. Welcome to the SNAP-1 Fiscal Second Quarter 2021 Earnings Conference Call. At this time, all participants are on the listening mode. After the speaker's presentation, there will be a question and answer session. I will now return the call over to your host, Eric Steele, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to SNAP-1 Fiscal Second Quarter 2021 Earnings Conference Call. As a reminder, this call is being recorded. Joining us today from SNAP One are John Heyman, CEO, and Mike Carlette, CFO. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions, including but not limited to statements of expectations, future events, or future financial performance. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially. These statements are based on current expectations of the company's management and involve risks and uncertainties, including those identified in the risk factors section of our registration statement on form S1 filed with the SEC. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the date of this broadcast, August 26, 2021. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on our investor relations website at investors.snap1.com. I will now turn the call over to our CEO, John Heyman. John?

Eric, thank you, and thanks for all of your leadership over the past quarters or so. First of all, welcome, everyone. Thanks for spending time with us this afternoon. Hope everybody's families are healthy. Recognizing that many of you might be new to the SNAP One story, I'm going to start today's discussion with a brief history, an overview of our business, Then I'm going to review some recent updates and highlights, and I'll turn it over to Mike Carlett, our CFO, to discuss financial results for the quarter and to provide guidance for the remainder of 2021. I'll have some closing remarks after that, and then we'll open up the call for questions. So let's get to it. At SNAP One, our mission is to bring together the best people integrators and products to make lives more enjoyable, connected, and secure. We began as SnapAV in 2005. We were founded by two professional integrators who saw an opportunity to transform how integrators in the smart living industry were served. These integrators work with consumers every week to design smart living experiences and They design, they purchase, they install, and then support the products required to bring those experiences to life. The process of evaluating products, locating them, purchasing them, receiving them, installing them, and then supporting these products for any given project was very time-consuming and expensive. And our company set out to dramatically improve what was an inefficient process. From the beginning, we understood the challenges that these integrators faced, and we sought to make their lives easier. We invested in their success so that they could deliver on the promise of the smart home and business for the end customers who depended on them. We disrupted the industry with things like an e-commerce ordering portal, brands exclusively sold through these integrators, and award-winning service and technical support. With this value proposition, we grew rapidly by expanding our professional integrator base and our product portfolio. As the smart living industry has evolved, we continue to raise the bar. First, we diversified from our initial products like cables and racks and mounts to more technically complex and software-driven products such as networking, surveillance, smart power, and these are all supported by our industry-leading remote management software platform, Oversea. We've also complemented our revered e-commerce platform with brick-and-mortar locations to reach a new group of integrators, deliver local services like product training, technical consultations, and last-minute delivery, and, of course, provide an omni-channel shopping convenience. We've also opened our ecosystem to third-party products and began reselling a curated set of non-SNAP-1 brands with the goal of providing integrators with a one-stop shop, if you will, for all the products needed to complete a job. And finally, most recently, we've entered the strategically important control and automation category with the 2019 acquisition of the industry-leading platform, Control Platform, Control Fork. Together with Control4's automation platform, we're able to deliver more reliable and fully integrated systems. We've accomplished all these advancements through significant internal investment and strategic M&A. Over the past five years, we've successfully completed 10 acquisitions, ranging from local distributors to leading technology companies like Control4. To reflect our evolution, we recently rebranded the company, and we're very excited about that, to SnapOne. And this represents our aspiration to be the one partner that professional integrators need for every job. We removed the AV, the audio-visual part of our name, because our company and our industry have expanded well beyond just entertainment solutions. As solutions get more complex and get more intertwined, We're dedicated to keeping things simple by providing exceptional product quality and selection, premium service and support, and an omni-channel shopping experience. The name SnapOne encompasses all we are today and our intent to continue to lead the industry in the future. Here at SnapOne, our B2B2C business model is purpose-built to drive value for all of our stakeholders. we're very well positioned to provide our loyal and growing network of over 16,000 professional do-it-for-me integrators with leading products, software platforms, technology-enabled workflow solutions that will help them successfully serve their customers and operate their businesses. With our partnership, our integrators can delight end consumers by selecting the right products, performing complex and manually intensive installations, supporting the system, and bringing the entire experience together in a unified way. Our integrator success is our success. And by partnering with SNAP One, our integrators can focus on their trade and leverage the tools and the infrastructure that we deliver to build thriving and profitable businesses. A strong value proposition creates a reoccurring spending pattern with these integrators that strengthen our relationships and enhance our revenue visibility from the integrator base. We were founded by integrators, for integrators, and we carry that legacy with us, being a leader in the industry as our integrators partner of choice. So with that as a backdrop, now let me get into where our business is today. Over the past few months, we've made considerable operational progress. and completed several milestone achievements for our business, highlighted by our public listing in July. The IPO was a momentous occasion for our industry, our integrators, and, yes, our company. I'd like to thank everybody for their tireless support, and we're confident that the future is very bright for SnapOne. Let me take a moment and recap a few of the highlights. First, we've expanded our omnichannel distribution presence into five new domestic markets. We opened or acquired brick and mortar locations in Charlotte, Scottsdale, Denver, Salt Lake, and Atlanta. This brings our nationwide footprint to 27 locations as of quarter end. All of these locations now make SnapOne's leading products immediately available for local integrators while extending our service offering through deeper sales, training, and support engagement. Second, we were humbled to be recognized as the number one or the number two brand, sometimes both, 36 times across 62 identified product categories in the 2021 CE Pro 100 Brand Analysis Awards. The company earned approximately five times the number of one and or two awards as the next most awarded competitor. This follows our record performance in CE Pro's 2021 Quest for Quality Awards, which were released in March and recognized the best service providers to the industry. Snap-on was recognized for 16 awards in the Quest for Quality Award, approximately twice as many as the nearest competitor. Together, these awards demonstrate the company's leadership position in the market and competitive differentiation across our product and service capabilities. Third, we've upgraded our Control4 OS3 software to provide full support for oversea remote management to our Control4 controllers. This was a major enhancement envisioned at the time of our Control4 acquisition, and it strengthens our commitment to make life simpler for integrators by offering them the ability to remotely manage and service clients' Control4 connected devices through the Oversea platform. With increased system visibility, integrators can more easily offer service contracts, troubleshoot devices, and reduce service calls. And finally, we acquired Access Networks, the enterprise-grade leading network solutions provider, offering networking products, design, configuration, monitoring and support services. The network is the digital backbone of Smart Living, and this acquisition enhances SNAP One's networking solutions for residential and commercial applications. We also announced a significant investment in Parasol, an industry-leading provider of 24 by 7 remote support subscriptions that improve integrator productivity and service levels. Both actions provide further momentum for our long-term strategy to support integrator customers across the project lifecycle. I'll touch on the financials before handing it over to Mike to discuss more. Number one, we delivered impressive results in several key performance areas, namely a 34% increase in net sales to over $253 million. and a 20% increase in non-GAAP adjusted EBITDA to approximately $29 million during the period. The business experienced growth across product categories, geographic regions, markets, et cetera, as we added new integrators, increased spend per integrator, and left the demand drop from COVID-19 in the second quarter of 2020. I'll talk quickly about demand sensors that we see and then long-term growth. As we assess the current demand for smart living solutions, we see it as very robust. Our integrators are extremely busy, and many are booked out months in advance. COVID-19 accelerated what were already healthy smart living adoption trends, fueling durable residential and commercial uptake that is continuing throughout this year. The residential investment cycle is particularly strong, and this quarter we saw an encouraging rebound in our commercial business as restaurants, bars, and retail reopened and companies began to return to the office. We continue to carefully monitor the resurgence of COVID-19 and any potential impact on the business. Mike will speak to the supply chain environment that's affecting the entire industry. But our company and our integrators have proven resilient in the face of challenging macroeconomic backdrops. We remain confident in our ability to successfully navigate any future uncertainty related to COVID-19. And I must say we salute our frontline employees, those in our local offices and our warehouses, and our integrators who are going into homes and businesses every day for their ongoing dedication and sacrifice. They are our industry's heroes. Longer term, our growth strategy has been to continue to affect the same playbook we've been doing for many years now. There are five key pillars to that growth strategy. One, continue to innovate with new products, software, and technology-enabled workflow solutions for our integrators. continue to increase our wallet share with our existing integrators with existing products, which includes continuing to execute our omni-channel strategy. Three, continue expanding our global integrator network with professionals focused on residential, security, and commercial applications. Fourth, develop new software services and revenue models. We made, we feel like, substantial progress against each of these organic growth pillars in the quarter, and with Access Networks and Parasol, we made strong progress against our fifth pillar, which is to execute against strategic M&A. As it relates to M&A, we view it as the core competency of ours and a strategic value driver for the business and for our integrators. We operate in a highly fragmented market. which lends itself to target-rich M&A landscape. With our scale, our track record, and now our access to capital, we've established ourselves as the acquirer of choice in the industry. We expect, as a result of that, to continue to pursue discipline, accretive acquisitions that enhance our products, software and workflow solutions, and expand into adjacent markets, that allow us to best serve our integrator base. With that, I am going to turn it over to Mike Carlett, our CFO, who will go through our financial results for the quarter in greater detail and talk through our guidance.