Traeger, Inc.

Backus, Vice President of the Investor Relations to begin. Nick, please go ahead.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss the second quarter 2024 results, which are released this afternoon and can be found on our website at investors.traeger.com. I'm Nick Backus, Vice President of Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer, and Don Blossel, our Chief Financial Officer. Before we get started, I want to remind everyone that management's remarks in this call may contain certain forward-looking statements that are based on current expectations, but are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein. We encourage you to review our annual report on Form 10-K for the year ended December 31, 2023, our quarterly report on Form 10-Q for the quarter ended June 30, 2024, once filed, and our other SEC filings for discussion of these factors and uncertainties. which are also available on the investor relations portion of our website. You should not take undue reliance on these forward-looking statements. We speak only as of today, and we undertake no obligation to update or revise them for any new information. This call will also contain certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted EBITDA margin, which we believe are useful supplemental measures. Most comparable GAAP financial measures and reconciliations of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release, which is available on the investor relations portion of our website at investors.traeger.com. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. I'll now turn the call over to our Chief Executive Officer, Jeremy Andrus.

Thanks, Nick. Thank you for participating in today's call to review our second quarter performance and discuss our business outlook. I am very pleased with our second quarter results. Our performance underscores the hard work our entire organization has put into driving increased efficiencies in our business over the last two years and further demonstrates our team's ability to execute in what remains a challenging consumer environment. While our second quarter sales of $168 million represents a 2% decline versus last year, our grills business was up 2% year over year, a significant improvement from the 14% decline we saw in the first quarter. Moreover, we delivered a very strong second quarter gross margin of 42.9%, up 600 basis points compared to the prior year. This resulted in adjusted EBITDA of $27 million, a 25% improvement from second quarter last year. Our better than expected results give us confidence in our outlook for the balance of fiscal 2024. Today, we are updating our fiscal year 2024 revenue guidance to a range of $590 to $605 million, and I am pleased to say that we are increasing our adjusted EBITDA guidance to $74 to $79 million, an increase of 15% at the midpoint of the range as compared to prior guidance. Our improved adjusted EBITDA guidance as being driven by an increase in our gross margin outlook to 40.5 to 41.5%, up from the prior range of 39 to 40%. As an outdoor cooking company, the second quarter is our most important selling period at retail as consumers buy ahead of the summer grilling season. Coming into the quarter, we are anticipating that ongoing weakness in industry demand would continue to pressure our grills revenue. As we noted on our first quarter earnings call, sell-through trends for grills remained negative in the early part of the year. The second quarter is typically a promotional period for our industry. Given the soft demand backdrop, this year we strategically leaned into promotions and offered incremental savings to the consumer. Consumers reacted favorably, and we saw a marked inflection point in sell-through trends as we kicked off the season with our Memorial Day promotion. Demand for our grills meaningfully improved as we moved through the second quarter and exceeded our expectations. I'm very encouraged by the strong consumer demand for our grills in the second quarter. In an economic environment that remains challenging for many consumers who are feeling pressures from inflation and with continued headwinds for big ticket home related purchases, our consumer came out in full force in our peak season. I believe there are a couple of key learnings here. First, notwithstanding the pressure we have faced in the last two years as consumers shifted to a post-pandemic and inflationary environment, there continues to be a large and growing appetite for Traeger products. The strong demand in Q2 not only speaks to the strength of the Traeger brand but ultimately points to the long-term opportunity for Traeger as brand awareness expands over time. Next, it is clear that the consumer is currently very price conscious, and we saw particular strength in our lower price point grills, a continuation of a trend we have seen for several quarters now. Long term, we view this as a positive development as consumers that come into the Traderhood exhibit high levels of retention, purchase our consumables over their lifetime as users, and oftentimes trade up to higher price point grills. Furthermore, it's important to note that Traeger remains positioned as a premium brand. For example, our opening price point grill is still at a materially higher price point versus the industry average selling price. Sell-through strength in grills during the quarter was further supported by our ground game initiatives. One of our long-term strategic pillars is driving increased brand awareness. which remains our largest opportunity to expand household penetration over time. Brand awareness and perception are clearly tied to the consumer's experience of our branded retail. And during the second quarter, we focused on driving excitement and engagement with consumers in collaboration with our retail partners. This included completing over 4,000 weekend selling events at retail partner locations where retail sales specialists train store associates for product demonstrations featuring Traeger grills and food cooked on the Traeger. The ability for consumers to see our product in action and to taste the flavor of wood-fired food makes all the difference in driving conversion at retail. We also partner with key retailers in certain must-win markets to drive boots on the ground activation, more targeted marketing efforts, and sales initiatives in store. These efforts not only provide important learnings for scalable ground game and marketing activation strategies going forward, but drove meaningful sell-through upside in these markets relative to control markets in the second quarter. From a selling perspective, better than anticipated consumer demand drove growth in grill revenues in the second quarter and is fueling an improved outlook for our grills business for the year. We now expect grill revenues to be approximately flat versus our prior outlook for a negative high single to low double digit percentage decline. As channel inventories were very clean coming out of Q2 and with the inventory wind down with end of life skews tracking ahead of schedule, our outlook for replenishment sales in the second half has improved. We also expect to benefit from initial load in of new product in the fourth quarter. Importantly, despite improved trends in the second quarter, we continue to plan the balance of the year prudently with respect to sell-through of grills, as we expect that consumer demand in seasonally slower periods could decelerate and acknowledge that the economic backdrop remains highly dynamic. The improved outlook in our grills business is being partially offset by reduced expectations for accessories revenues driven by meter. In the second quarter, meter experienced lower than anticipated sales in its e-commerce channels, which make up a majority of its revenue base. We believe that meter is being impacted by changes in our demand creation strategy implemented earlier this year, which proved ineffective in driving top line. The good news is that we believe we have diagnosed the issues impacting the business and have implemented strategies to drive improvement going forward. This includes adjusting our demand creation strategy as well as driving new product innovation in the second half of the year. Also, we are doubling down on expanding Meters wholesale distribution and will be relaunching our retail offering with improved packaging and in-store fixtures ahead of holiday. We remain confident in the long-term opportunity for METR and believe the changes we are making position the business for improvement. It is important to note that the majority of METR's year is in front of us with more than two thirds of full year revenues occurring in the second half. And so there's ample time to pivot effectively. Moving on to consumables. Second quarter consumables revenues were largely in line with our plan and were impacted by a timing shift into the first quarter. Looking at first half consumable sales to normalize for this timing shift, revenues were up 2% versus prior year, which speaks to the recurring and stable nature of our consumables revenues. We continue to expand distribution of the consumables into the grocery channel, and we believe this is a natural extension of our current distribution footprint which drives convenience for consumers to purchase our pellets, rubs, and sauces. In the second quarter, we added distribution of pellets, rubs, and sauces to 200 associated food stores. We also added additional pellet SKUs at Lund's and Byerly's, Market of Choice, and Hy-Vee. We continue to see meaningful opportunities to grow share via increased distribution and share of shelf. Turning to international, our international business remains a meaningful long-term opportunity for us. In the second quarter, international results at Traeger were heavily dependent on region and channel of distribution. For example, in Canada, we saw a significant acceleration in sell-through trends in our big box channels as consumers responded favorably to our summer promotions. The specialty channel in Canada, by contrast, saw challenging results in the quarter with pressure on grills north of $1,500. In Europe, sell through was softer versus last year, and our distributors continued to work through excess inventories. The consumer environment in many of our international markets continues to be challenging. However, we remain focused on the long-term opportunity to drive awareness and penetration of the Traeger brand by replicating many of the strategies that have been successful in the U.S. This includes implementing ground game strategies like in-store product demos and increasing brand presence with elevated merchandising and by activating the brand on social media. In closing, I'm incredibly proud of our organization's ability to execute and to deliver strong results against a challenging backdrop. Our second quarter results demonstrate our commitment to delivering continued improvements to our business. My confidence in the long-term opportunity for Traeger remains very high, and our business is well positioned for long-term success. And with that, I'll turn it over to Dom to provide more detail on our second quarter performance and our updated outlook for fiscal 2024. Dom?