SharkNinja, Inc.

Greetings. Welcome to Shark Ninja's second quarter 2023 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Arvind Bhatia with Investor Relations. Mr. Bhatia, you may now begin.

Hello, everyone. Good morning and welcome to Shark Ninja's second quarter 2023 earnings conference call. Joining me on today's call are Mark Barocas, Shark Ninja's chief executive officer, and Larry Flynn, interim chief financial officer and chief accounting officer. Mark will begin by providing an overview of Shark Ninja's business model and the key reasons we believe We are well positioned for long-term growth. Larry will then review our financial results and discuss our 2023 outlook. After that, we will open the call for your questions. By now, everyone should have access to the earnings release for the period ended June 30th, 2023, issued this morning. The press release is accessible on the company's website at ir.gov. and shortly after the conclusion of today's call, a webcast will be archived and available for replay. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. If you refer to Shark Ninja's earnings release as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially as a result of these forward-looking statements. Please remember the company undertakes no obligation to update or revise these forward-looking statements in the future. During the call, we will make a number of references to non-GAAP financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Now, I will turn the call over to Mark.

Thanks, Arvind. Good morning, everyone, and thank you for joining us on Shark Ninja's first earnings call as a public company. following our successful listing on the New York Stock Exchange last month. I am thrilled to have the opportunity to discuss with you our powerful business model, strong second quarter results, and positive outlook. Let me start by telling you a bit about Shark Ninja. We create innovative products that solve consumer problems. We have built a repeatable consumer problem-solving engine with a mission to positively impact people's lives every day in every home in the markets that we serve. We are not an overnight success. I have been leading Shark Ninja's day-to-day business since 2008 and have been surrounded by an incredible team that has driven the company's transformation from an early-stage pioneer in small household appliances to a leading global product design company. We have grown our net sales from less than $250 million in 2008 to over $3.7 billion in 2022, a compound annual growth rate of 20% over the last 15 years. We have delivered growth in 14 out of these 15 years, and this growth has been organic. We have not bought a dollar of growth over that period. Our $2 billion brands, Shark and Ninja, have each disrupted the categories in which they operate. Our brands are deeply trusted by consumers, and our business is highly diversified, which has allowed us to drive sustainable long-term global growth. We are diversified across brands, products, product categories, distribution channels, and geographies, and we are not dependent on any one retailer or supplier. We're currently in 28 product subcategories across these two brands and have presence in 26 markets globally. We sell our products through more than 150 retailers, from mass retail to department stores to specialty retail, and online through our own websites leading e-commerce platforms and marketplaces. This is a conscious strategy we've been working on since the beginning, and we aim to further this diversification over time. Before elaborating on these points, let me provide a quick overview of our second quarter results and our full year outlook. During the quarter, we grew adjusted net sales by 20%, and adjusted EBITDA by 40%, while expanding adjusted EBITDA margin by 180 basis points year over year. These results demonstrate our ability to execute on our three-pillar growth strategy as we continue to increase market share in existing categories, pioneer new categories through innovation, and globalize our brands. We delivered growth in all four key categories, cleaning, cooking and beverage, food prep, and other, which includes home environment and beauty. Recently launched products in the beauty and outdoor cooking categories delivered strong results. Geographically, European markets performed particularly well, continuing to exceed our internal expectations. Our Q2 and first half results build upon a proven track record of delivering profitable, organic growth through high-performance products that address everyday consumer challenges. Looking forward for the full year, we expect trends to remain strong. We are well-positioned to deliver adjusted net sales growth of 10% to 12%, adjusted EBITDA growth of 25 to 31 percent, and adjusted EBITDA margin expansion of approximately 200 basis points year over year. Larry will provide additional guidance in his prepared remarks. Next, I want to share how we plan to deliver sustainable growth over the foreseeable future. Our growth strategy can be defined by three key pillars. One, driving growth within existing categories by continuing to rapidly innovate and take market share. Two, expanding across new subcategories and adjacencies, which drives more use occasions and more products per household for the brands. And finally, building out the Shark Ninja presence in our key international growth markets and globalizing our brands. Let me talk about each of these in a little more detail as they're critical to understanding the Shark Ninja story and our plans to unlock value for our shareholders. We have a proven track record of driving growth and gaining share in the subcategories in which we operate. Shark was the number one selling floor care brand in 2022, and Ninja was the number one selling small kitchen appliance brand for the last three years in the U.S., according to NPD. Once we enter a category, our plan is to consistently launch new products with new features and functionality while optimizing the cost of existing products. This strategy allows us to reach additional price points, diversify our products, and increase shelf space. Turning to expansion into new and adjacent categories We're very intentional about the categories that we enter. We believe that we are uniquely positioned to disrupt large and fragmented categories through our proprietary consumer insights and innovative product development approach. Let me share a few recent examples. In 2021, we entered the ice cream category with the introduction of the Ninja Creamy, which quickly became the number one selling ice cream maker in the U.S., while also doubling the entire category size. In 2021, we also entered the beauty category with the launch of the Shark HyperAir Hair Dryers. Within a year, it became the number one selling hair dryer in its price range. This was followed by the successful launch in the fall of last year of FlexStyle, an innovative hair styler and dryer. Year to date in 2023, we have a leading market share in hairstylers in the U.S. Additionally, we have also successfully launched FlexStyle in over 17 European countries. During 2022, we entered the outdoor grill category with the launch of Ninja Wood Fire. Building upon our success in indoor cooking, we developed a unique grilling technology, allowing our consumers to deliver authentic wood fire flavors, in a sleek and compact product. We have further expanded our presence in outdoor cooking with the recent launch of the Ninja Outdoor Oven. And just this month, we entered the fast-growing beverage category with our newest innovation, the Ninja Thirsty Drink System. With Thirsty, consumers can personalize and create thousands of drink variations with numerous combinations of flavor, flavor strengths, fizz levels, and sizes at the touch of a button. Through consumer research, we identified the challenges of many households to find better drink options without having to buy a shopping cart full of drinks. These are just a few examples that demonstrate that solving consumer problems and pain points is at the center of our strategy across every category which we operate. As we look forward, we believe our new product development pipeline remains strong, positioning us well for continued growth over the foreseeable future. On an annual basis, we aim to launch more than 20 new products across existing and new categories. Turning to our third growth pillar, international expansion remains a key area of strategic focus for us. We currently operate in 26 markets across the globe, including the US, Canada, UK, Germany, France, Italy, and Spain, where we operate directly, and the remaining markets where we sell through distributors. We make informed decisions to go direct in key markets and have consistently leveraged this model to successfully enter and meaningfully grow in new markets. Our success in the UK market is a good example of that. We pivoted in the UK from a distributor model to a direct Shark Ninja operation in 2014, leveraging our core competencies across marketing, distribution, and innovation to drive rapid share gains. Since then, we have grown our UK business tenfold from $50 million to nearly $500 million in net sales last year. Driven by the UK and European markets, our international business continues to grow rapidly and is fast approaching a billion dollars. Continued expansion in these markets remains a key priority for us. So how do we plan to deliver our three pillar growth strategy? As we have done in the past, we will stay focused on the consumer leverage our best-in-class innovation engine, ensure our go-to-market strategy is highly effective, and continue to rely on our agile and scalable supply chain. Each of these elements is a critical piece of our growth flywheel. So let me share additional insights in these areas. First is an intense focus on the consumer. Serving them is at the forefront of every decision we make, and we believe that consumers deserve the highest performance and greatest value for their hard-earned dollars. Our global consumers are discerning, understand value, and have done their research, and are consistently delighted by our products. We don't take anything for granted and know that our educated consumers who are buying our products won't always give us a second chance. So we aim for perfection every time. We strive to deliver on all four of the critical consumer value points in every innovative product we bring to market. Speed, as we aim to be first to market. Performance, with the goal of exceeding consumer expectations. Quality, as we deliver durable and reliable five-star products and experiences, and value, making prices accessible. Next, I will spend a minute on our disruptive innovation driven by consumer insights and dynamic testing. We have a scaled engineering powerhouse where product design is a fundamental part of our culture and our approach to innovation. and design really powers our idea generation machine. Our global in-house team comprises more than 700 engineer and design associates across Boston, London, and China, and encompasses the full range of skill sets from R&D, industrial design, mechanical design, mechatronics, electronics, software, and IoT. This allows us to have a 24-7 development cycle, enabling ideas to go from sketch to production very quickly. Our approach to problem solving and designing products is centered around delivering market-leading performance, multifunctionality, high quality, and extraordinary value to the consumer. Consumer products deal with everyday tasks which can be very easy to take for granted and to accept that this is just the way things are done. Our design teams do not accept this, and we push to constantly analyze consumers' interactions with small home appliances and leverage consumer reviews to really understand and identify new and unique ways of doing things. By listening to and testing the consumer at the outset, we aim to develop technologies and systems that are disruptive in the marketplace. Even in subcategories that haven't seen disruptive technology in decades, such as cookware and cutlery, we found a way to bring innovation to the table. Across both the Shark and Ninja brands, we have used our award-winning technologies and engineering excellence to repeatedly disrupt and quickly gain share in large adjacent markets. Whether you're making ice cream, grilling a steak, or styling your hair, a key disruptive feature of Shark Ninja Engineering is how we break down and simplify complex and difficult everyday jobs and design products which makes these tasks accessible for all. You don't need to be a professional stylist or barbecue chef to get positive results from our products. Our consumer insight-led engineering and design process enables us to invent systems and develop user interactions which allow consumers to unlock user-friendly and proven output. Next, let me cover our differentiated go-to-market strategy. and how that has enabled us to deliver growth and market share gains year after year across various categories. We plan to continue to deploy this proven strategy going forward. From a sales and marketing standpoint, we have an omnichannel distribution strategy, and we support it with diversified marketing efforts to drive traffic and sales. We are retailer and channel agnostic and ensure our products are available wherever our consumers are. Globally, we have partnerships with over 150 retailers. We have been able to gain improved placement at key retailers for our product categories given our strong strategic relationships and a proven track record of launching and winning share. Retailers want to be on the front end of Shark Ninja's innovation, and we see strong support from our retailer partners, both in existing and new categories. From 2021 to 2022 alone, we gained an incremental 113,000 distribution points at retail, driven by innovation and retailer support. In addition, we have a rapidly growing and higher margin direct-to-consumer business that allows us to strengthen our connection with consumers. Our marketing efforts focus on both long-form infomercials, short-form linear TV, streaming services, organic and paid social media, and influencer and marketing platforms. We have 95% aided brand awareness largely attributable to our ability to cultivate online communities comprised not only of consumers, but also brand advocates. These passionate ambassadors actively share their personal experiences, showcasing how Shark Ninja effectively addressed their needs and challenges. This combination of what we refer to as our always-on marketing approach and distribution strategy allows us to drive sales and gain share across various markets. Let me now take a moment to talk about our supply chain, which is another differentiator for us. We have built a predictable, flexible, and resilient supply chain that delivers high-quality products. We have a highly diversified supplier base across Asia with low supplier concentration. We have purposely built redundancy into our supply chain for high volume SKUs. Our approach helped to minimize the impact of COVID shutdowns on our business and inbound supply plan. Our approach also means that if tariffs are reinstated, we expect we will be well prepared. Our relationships with our suppliers have been built and cultivated over the past 15 years. And these relationships are a competitive advantage. Over the last 15 years, we have made significant investments in our infrastructure, including hiring 700 Shark Ninja employees in Asia. We have embedded many of these employees in our factories, which allows us to deliver better quality at a lower cost. Another benefit to these relationships is incredible flexibility. enabling speed to pivot our supply chain in alignment with demand changes. For example, we have partnered with our factories to go from industry-typical 75-day PO lead time to 30-day PO lead time. We also have strong, long-standing partnerships with our shippers that enable competitive inbound freight rates and capacity, even when the market is constrained. Bottom line, we believe Shark Ninja's supply chain is unlike any other, providing a competitive advantage. To sum it all up, while we have come a long way over the last 15 years, when I think about the white space in front of us, I believe our journey is just getting started. We estimate our current total global addressable market is above $100 billion and continues to grow. With net sales approaching $4 billion, our market penetration rate is still relatively low. As we continue to launch new products in existing categories, expand into new categories, both inside and outside the home, and continue to expand our brands globally, we expect to gain additional market share. Leveraging our deep understanding of consumer needs and our engineering prowess, we aim to continue pioneering disruptive innovation that shaped the industry. I would now like to turn the call over to Larry, who will walk you through our second quarter financials and outlook in more detail.