Snap One Holdings Corp.

Good afternoon. Welcome to SNAP-1 Holdings Fiscal Second Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. I would now like to turn the call over to SNAP-1 Senior Vice President of Finance, Eric Steele. Sir, please proceed.

Great. Thank you. Good afternoon and welcome to SNAP-1's Fiscal Second Quarter 2023 Earnings Conference Call. As a reminder, this call is being recorded. Joining us today from Snap One are John Heyman, CEO, and Mike Carlett, 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 inherent risks and uncertainties, including those identified in the risk factors section of our latest annual report on Form 10-K filed with the SEC and our most recent quarterly report on Form 10-Q. 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 time and date of this broadcast, August 8, 2023. 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.snapone.com. In addition to the webcast, we have posted a supplemental earnings presentation accompanying these results, which can also be found on our investor relations website. I will now turn the call over to our CEO, John Heyman. John?

Thank you, Eric, and welcome, everyone, and thanks for joining us this afternoon. To begin today's discussion, I'm going to give some company background, followed by a review of our recent performance, and then I'll turn the call over to Mike Carlett, our CFO, He'll discuss our financial results for the quarter in more depth, as well as provide our outlook for the remainder of the year. After that, I'll share some closing remarks before opening the call for questions. Let's get started. As a reminder, at SNAP One, we provide a smart living platform that empowers professional integrators to deliver joy, connectivity, and security to discerning residential and commercial customers on a global scale. As a leading distributor to these integrators, we work with our growing network of approximately 20,000 Do It For Me integrators to distribute our proprietary and third-party products through our e-commerce portal and local branches. We further support our integrator partners with our proprietary software platforms and workflow solutions to allow them to successfully serve their customers across the project lifecycle. We believe the smart living opportunity is large and durable. Secular tailwinds, including technology adoption, software enablement, housing construction, and small business formation will continue to propel the industry and our company forward. Many end users will seek professional help to select, install, integrate, and support the technology solutions they require. At SNAP One, we aim to provide our integrator partners with the right products, software, services, and workflow tools to capitalize on the smart living opportunity. I'll turn now to our recent performance. Our team delivered solid Q2 results, including $274.4 million in net sales and $31.7 million in adjusted EBITDA, while ongoing channel inventory destocking impacted top line results as anticipated, we are executing on our product development, go to market, and margin enhancement strategies. We drove a sequential quarterly improvement in contribution margin rate from 42.1% of net sales in Q1 to 42.7% of net sales in Q2 as we continue to extract costs from our supply chain. Additionally, our focus on discipline cost and investment management is expanding operating margins for the business. We continue to see stability in the demand environment amid the broader macroeconomic uncertainty. First, our partners continue to indicate that they are sustaining healthy backlogs in their own businesses. Our diversified business model and product portfolio allow us to serve integrator partners across a variety of residential and commercial end markets. which supports our partners' ability to pivot projects and adapt to the current environment. Also, while we're hearing some cautionness from more budget-oriented end customers for entry-level projects, we believe that the high-end residential and growing commercial markets remain resilient. Second, the macroeconomic backdrop, which has proved volatile in recent quarters, showed some sequential improvement across several indicators, including home builder confidence, luxury home market health, and overall U.S. consumer confidence. All signs point to a housing market that notwithstanding shorter-term headwinds around interest rates and inventory availability will be quite robust while we look over the next decade. As we reflect on our second quarter performance and look ahead to the remainder of the year, we are focused on two key strategic initiatives for 23. One, driving higher product adoption by our partners, and in turn, delivering far better end customer experiences. And two, expanding our operating margins through several key programs, which have already yielded very positive results. I'll take a few minutes to address each of these in the context of our second quarter results and the rest of the year outlook. First, partner adoption. Following a period of significant supply chain uncertainty, we believe we are well positioned to drive significant adoption of our products with a multi-pronged approach that includes both introducing new products and software and refining our go-to-market strategy. Coming off a strong first quarter of product launches, we continued delivering new product innovation and enhanced software platform capabilities in the second quarter. including the introductions of exciting new solutions across audio, control, surveillance, and networking. A few important highlights include, one, the CoreLight Controller, which offers our partners a simple and profitable solution for single-room applications, completing what we believe to be the industry's most robust lineup of controllers and makes an entry-level Control4 ecosystem more accessible. Two, the Triad Passive Soundbars product line, which underscores our continued investments in premium audio solutions for our partners. And three, continued product innovation designed for the commercial market, including multi-gig Arachnus routers and award-winning Strong Carbon series mounts. Finally, I'd be remiss not to mention our July launch of the flagship Halo Touch, our latest touchscreen remote, that also enables voice interaction with our systems. Together, these exciting launches strengthen our product portfolio and help us set a strong foundation for a robust pipeline of continuous innovation from Snap One. Our partners recognize this innovation by ranking us a top five brand 45 times across 62 product subcategories in the 2023 CE Pro 100 brand analysis awards, which represents five times the number of recognitions of the next closest competitor. As our product offerings become more software centric, we continue to invest in both our oversee and control for software platforms. These platforms provide for value added services, which we plan to build upon in the near future. Also, we continue to make progress on our go-to-market strategy as we pursue growth opportunities in new markets. First, we completed the conversion of our legacy SnapAV and Control4 domestic e-commerce portals to a single platform in order to enable our partners to engage with us more efficiently, allow us to drive marketing programs with higher efficacy, and streamline our internal operations. Second, We continue to leverage our best-in-class loyalty program to drive product category and ecosystem adoption and to further strengthen product adoption by our partners. And finally, we've continued investing in our strategic omnichannel presence, including the opening of our new Raleigh location in July and several anticipated additional branch openings in the second half of the year. Our second strategic initiative is driving operating margin expansion. During COVID and the supply chain crisis, we made a number of decisions that focused on keeping our partners in business. These ranged from inefficiencies from securing and expediting product and componentry to numerous research and development pivots based on abrupt changes in chip availability. As the supply chain has normalized, we are returning to our operational cadence of driving lower unit costs and freeing up our product teams to do what they do best, build new products. We're also driving scale within our operating model. Integration activity related to previously completed acquisitions, as well as investments we have been making within our technology infrastructure, are starting to yield results. These investments will support our operating margin growth expectations throughout the remainder of 2023. Let me now comment briefly on our outlook before turning the call over to Mike. With the first half of the year now complete, our full year 2023 outlook remains positive as we seek to move past the channel inventory destocking headwind, drive operating margin expansion, and enhance our liquidity position. Also, our continued contribution margin rate expansion and disciplined cost structure management provide us with confidence in our profitability expectations. Therefore, we are reaffirming our outlook for both net sales and adjusted EBITDA for 2023, which Mike will discuss in further detail. We believe that growth in smart living adoption, the central role of the integrator in providing holistic solutions, our competitive differentiation, and our coming service innovations will enable us to prosper in a dynamic macro environment and will propel us, excuse me, propel our long-term success. With that, I'll turn it over to Mike, our CFO, to discuss our second quarter financial results and 23 outlook in greater detail. Mike?