Traeger, Inc.

Good afternoon. Thank you for attending the Traeger fourth quarter and full year 2024 earnings conference call. My name is Cameron and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. And I would now like to pass the conference over to your host, Nick Backus, Vice President of Investment Relations with Traeger. May we see you.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its fourth quarter 2024 results, which were 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 on this call may contain certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations of the use of future events, including, but not limited to, outlook as to our anticipated first quarter 2025 and full year 2025 results. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein. I encourage you to review our annual report on 4 and 10-K for the year ended December 31st, 2024, once filed, and our other filings for discussion of these factors and uncertainties, which are available on the investor relations portion of our website. You should not take under reliance on these forward-looking statements, which we speak to only as of today. We undertake no obligation to update or revise them for any new information. This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted EBITDA margin, and net debt, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release and investor presentation. which are available on the investor-related portions 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. Now, I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy?

Thanks, Nick, and good afternoon, everyone. I'll start today's call with an overview of our fourth quarter and a recap of 2024, and then we'll discuss our outlook for 2025 before turning the call over to Dom. I'm pleased with our solid finish to the year in the fourth quarter. From a revenue perspective, we delivered 3% growth in the quarter with particular strength in our grills business, which was up 30% as compared to the fourth quarter of last year, and our consumables business, which was up 25% compared to last year. We continue to see strong margin gains in the quarter with gross margin up 410 basis points compared to the prior year. This resulted in fourth quarter adjusted EBITDA of $18 million, up 41% from the fourth quarter in 2023, putting us above the high end of our adjusted EBITDA guidance for the year. Our fourth quarter capped off a solid year for our company. Despite ongoing challenges in the macroeconomic backdrop, results for the year ended significantly better than we initially guided to. Importantly, we saw an inflection in our grill business in 2024, with grill revenues up 8% for the year, substantially better than our outlook coming into the year. This was driven by strong consumer reception of our strategy to lean into promotions and peak selling periods, which contributed to market share gains. Notably, we were able to employ this strategy and drive sell-through while meaningfully growing our gross margin. Our initiatives to drive efficiencies in our supply chain and to improve our margin structure, in addition to lower transportation costs, drove a 540 basis point improvement in our gross margin for the year. This resulted in adjusted EBITDA growth of 34% in fiscal 2024. During the year, we also made significant progress on key strategic initiatives and our long-term growth pillars. This includes driving our brand awareness, which continues to grow. With our household penetration of just 3.6%, growing our market share is our largest long-term opportunity. In 2024, we made progress in this area as we gained share in our grills business. During the fourth quarter, the energy around the Traeger brand continued to build. We leaned into social media, brand ambassador, and influencer content, which remain key platforms for us to engage our audience. Our brand activation strategy in the fourth quarter centered around holiday-themed content, including a video featuring barbecue influencer Matt Pittman on the perfect holiday prime rib, cooked on the Traeger, and of course, content on smoking a Traeger for Thanksgiving. Traeger leads the outdoor cooking industry in follower count across social channels, and our audience continues to expand. This is particularly true for YouTube, where our recent launch of Traeger Kitchen, our weekly cooking series featuring chefs and pitmasters cooking on the Traeger, drove more than 50% subscriber growth in the fourth quarter. We also leaned into strategic partnerships in the culinary space as a brand activation strategy. This includes a collaboration with Maiden for a limited release enameled cast iron brazier in the fourth quarter. We also partnered with Bullet Frontier Whiskey for a holiday collaboration, including a two-part video series that paired chefs and bartenders to craft a perfect holiday menu featuring food cooked on the Traeger as well as flavorful cocktails using Bullet Whiskey. Aligning ourselves with on-trend brands like Maiden and Bullet is a cost-effective way to increase awareness of Traeger with new audiences to drive buzz around the brand. From an innovation perspective, we officially launched our new Woodgrid series of wood pellet grills shortly after the end of the year, on January 16th, and began to ship product to our retailers in the fourth quarter. The Woodgrid series of grills features some of our latest technological innovations and offers enhanced features at approachable price points. Enhancements include an easy clean grease and ash keg, which collects drippings and pellet ash, more cooking space, and our free flow fire pot, which creates more airflow beneath the pellets, generating more smoke for a deeper, richer flavor. The development and launch of the Woodridge series was a cross-functional effort across many parts of the Trader organization. I believe that this was the best launch in our history. From product development to manufacturing to our go-to-market strategy, every step of the Woodridge launch was executed at a high level. One area of note is product testing. We conducted more testing for the Woodridge than we ever have for any product launch and logged over 10,000 hours of cooking before the launch to ensure the highest quality experience for users. From a brand engagement perspective, the launch garnered significant attention, and brought a ton of energy to Traeger, generating more than 1.2 billion impressions and record-breaking engagement across social channels. We also engaged and invested in retail training to support our retail partners like Ace Hardware and Home Depot. We've invested in on-site regional training focused on the new Woodbridge series, as well as other key selling techniques to educate store associates as the more they know about Traeger and the Woodridge line, the more they will sell. Early reads on sell-through for Woodridge have been strong, and we are encouraged by the consumer reception thus far. In the fourth quarter, Grill's revenues increased by 30% to the prior year, as we benefited from the initial loading of Woodridge and improved sell-through at retail. Grill performance was better than expected, an underlying sell-through of grills was positive in the quarter. We saw particular strength during our holiday promotional period. In fact, Black Friday 2024 was one of the biggest sell-through days in our history. As we have noted on prior calls, we are seeing outperformance in our lower price point grills. We believe this confirms that there was a significant demand for Traeger product at approachable price points. In 2025, we'll be focused on boots-on-the-ground sales activation efforts to drive consumer education and conversion at retail. A great example of this is our Roadshow program at Costco. Traeger's Roadshow program brings our wood-fired grills directly to Costco members. Traeger brand ambassadors set up product demonstrations in Costco warehouses to educate and sell grills to members on a consignment basis around the country. Our brand ambassadors are well-trained advocates of Traeger and engage with a high number of Costco members on a daily basis, significantly driving brand awareness in the area. This program was an early growth driver of the Traeger brand, and we are planning to more than double the number of roadshows we do in 2025. Moving on to consumables. We had some exciting developments in our consumables business in the fourth quarter, and growth was strong, up 25%. This growth was driven by increased replenishment as both our core flavors of pellets and seasonal offering, turkey blend pellets, saw healthy sell-through during the quarter. Additionally, in the fourth quarter, we launched new distribution of pellets and rubs into select doors at Walmart, a new retail partner for Traeger. For the last several years, we have been focused on increasing distribution of Traeger pellets and food consumables into the grocery channel. We believe that Traeger consumers want to be able to purchase their pellets not only where they bought their grill, but also at the grocery store where they shop on a weekly basis. Walmart, therefore, is an incredible partner to meet this need for our consumers. We began loading pellets and rubs into Walmart in December and are excited to offer a new channel for our consumers to purchase Traeger consumables. Critically, our consumer research indicates that the Walmart shopper has little overlap with their existing distribution channels with respect to their pellet purchases, and therefore, we think this is an incremental market share opportunity. Let's turn to our accessories business. Our accessories revenue in the fourth quarter were pressured by a decline at meter. Last quarter, we discussed meters under performance and our expectations for sequential improvement in the fourth quarter, which is meters most important quarter. While we did see some level of improvement in the rate of decline as compared to the third quarter, fourth quarter results were lower than expected. We believe there are several drivers of the under performance at meter. As we spoke to on our last call, after having made a decision to pull back on marketing spend at meter earlier in 2024, we re-accelerated marketing spend in the fourth quarter. Ultimately, we didn't experience the lift in demand we were expecting from the incremental marketing spend in Q4, and return on advertising spend was lower than expected. We believe that the reduced efficiency of our demand creation was driven by heightened competition in the meat probe space, as well as higher costs in the fourth quarter related to the election. We also believe that growth in the meat thermometer category slowed in 2024 after seeing several years of strong gains contributing to a tougher demand backdrop for meter. We have strategic plans in place to improve meter. This includes optimizing the balance of demand creation spend in ROAS, changing leadership of several key functions at the organization, and reconfiguring our long-term product roadmap. Furthermore, we continue to view retail distribution as a large opportunity for METR and have put resources behind our efforts to expand this channel. Notably, we recently launched distribution at select Walmart stores and expect to see additional distribution wins going forward. While we expect these strategic changes to drive improvement in meters performance, in 2025, we are planning for continued softness during this year, as we believe the benefits from these efforts will take time to bear fruit. We do, however, continue to feel confident and meters brand positioning as a leader in the wireless meat thermometer category. In terms of our fiscal 2025 outlook, Dom will provide more details, but let me give some high-level thoughts. For the year, we are guiding to revenues of $595 to $615 million. We're approximately down 2% to up 2% and adjusted EBITDA of $75 to $85 million. Our top line outlook anticipates growth in our grills and consumables categories, offset by a decline in our accessories category, driven by an expected decline in meter. With respect to tariffs, our current guidance does not build in the impact nor offsetting mitigation of recently enacted tariffs or any future tariffs. This is because trade policy is a highly dynamic topic then there is significant uncertainty around how exactly policy evolves and how tariffs will impact our industry and the U.S. consumer more broadly. With approximately 50% of our sales driven by goods imported to the U.S. from China, our organization has been analyzing news on trade policy and has been working aggressively on strategies to offset the potential impact of tariffs for some time. Our ongoing mitigation strategies include supply chain efficiencies and savings, negotiations with our contract manufacturers, and potential price increases. We are taking a proactive approach to mitigating tariffs, and our strategies will continue to evolve as there is more clarity in this fast-changing environment. It's important to note that nearly all of our consumables are manufactured in the United States and the majority of our accessories are not sourced from China. Also, I want to emphasize that we have extremely experienced and talented set of teams across supply chain, finance, and other functions, as well as great relationships with our vendors and retail partners, which will be strong advantages in this uncertain environment. Overall, despite an uncertain macro backdrop, my confidence in Traeger has never been higher. indicators of our brand health remain very strong. We gained share in 2024, and consumer demand for our grills exceeded our expectations. We continue to have an industry-leading NPS score with a highly evangelical base of consumers. Moreover, the investments we have made into our product development engine position us for continued innovation in the years to come. We have driven efficiencies across our cost and margin structure, and we are well positioned for a strong flow through when industry demand becomes more robust. I'd like to thank everyone on the Traeger team for their hard work and contributions to the business. Lastly, as announced in our press release, Dom Blazel has decided to transition out of his role as CFO. Dom has been an incredible partner over the last 11 years, and I want to thank him for his many contributions. He will remain CFO through our first quarter 10-Q filing, after which Joey Hoard, our current SVP of Finance and Strategy, will step into the role as part of a planned succession. We're excited to welcome Joey to the executive team. With that said, I'll turn it over to Dom. Dom?